FTSE Spared Worst Of Brexit Market Meltdown

Markets were plunged into turmoil after the UK voted to leave the EU, though the FTSE 100 was spared the worst of the pain by the time it closed in a roller-coaster session.

London's leading share index fell by 7%, or nearly 500 points, minutes after opening, reducing the paper value of its constituent companies by more than £120bn while the pound slumped to a 31-year low against the US dollar.

The turmoil prompted an intervention by the Bank of England, which made available a £250bn war chest to support markets while governor Mark Carney pledged that it would not hesitate to take further measures - amid speculation it would slash interest rates to zero.

By late afternoon trading the FTSE 100 was just 1.8% lower - as investors recovered from the initial vote shock to draw breath and hunt down bargain stocks.

It (Other OTC: ITGL - news) closed 3.2% or 199 points down at 6138. It meant that £52bn in value was lost on the day however the FTSE had actually started the week on 6021 points - below Friday's close.

Shares (Berlin: DI6.BE - news) in house builders were worst hit with Taylor Wimpey (LSE: TW.L - news) ending the day down almost 30%.

State-backed banks Royal Bank of Scotland (LSE: RBS.L - news) and Lloyds Banking Group (Other OTC: LLOBF - news) , as well as Barclays (LSE: BARC.L - news) , were also 20% down at one stage.

British Airways owner International Airlines Group issued a profit warning hours after the result became clear, saying earnings growth for 2016 would not match that of last year.

Its shares were down 22% on the day.

The mid-cap FTSE 250 - comprising UK firms - lost over 7% of its value.

Stock markets on the continent fared worse amid the prospect of the UK, a country currently making up one sixth of total EU output, leaving the bloc.

Germany's Dax was down 6.8% and France's Cac 40 8% off at the close.

The Ibex in Spain shed 12.4% while Italy's Mib was also more than 12% lower.

Matt Sherwood, head of investment strategy at fund manager Perpetual (Other OTC: PRPLF - news) , said: "Obviously, there will be a large spill-over effect across all global economies ...

"Not only will the UK go into recession, Europe will follow suit."

US stocks fared better with the Dow Jones Industrial Average down by 3.5% in late trade, however sterling continued to take a beating on Friday evening trade.

The pound hit its lowest level since 1985 at one stage.

The sharp dive in the currency was even bigger than on Black Wednesday in 1992. It was 8% down at $1.36 against the US dollar late on Friday while it was 6% lower against the euro at €1.23.

The collapse in the pound will be of immediate concern to holidaymakers who will find their money does not go as far in summer break destinations from California to the Costa del Sol (LSE: 0NJP.L - news) .

It is also likely to push up some shop prices as imported goods will cost more for British consumers.

UK companies will also find that materials they buy, for example in dollars, will be more expensive.

However, the fall in the pound could make some British goods cheaper for foreign buyers, helping exports.

:: LIVE BLOG: Reaction As UK Deliver Historic Out Vote

:: UK Votes To Leave EU In Historic Referendum

The billionaire currency investor George Soros warned earlier this week that the pound could go as low as $1.15 in the event of a Leave vote.

The reaction was all the greater for markets since they had confidently been pencilling-in a Remain victory on the back of a series of predictions from pollsters and bookmakers - sending the FTSE 100 and the pound higher in Thursday trading.

The Bank of England said it was "monitoring developments closely" and pledged to "take all necessary steps to meet its responsibilities for monetary and financial stability".

Governor Mark Carney said market and economic volatility was to be expected as the UK negotiates new relationships with Europe and the rest of the world but that it was "well prepared for this" after extensive contingency planning with the Treasury.

He said the Bank was ready to provide more than £250bn of additional funds to keep markets functioning and would not hesitate to take further measures.

Some experts predicted the Brexit vote would send the UK back into recession and there was speculation that interest rates could be cut from 0.5% to zero in coming months to cushion the economy from the expected blow.

Ratings agency Standard & Poor reaffirmed its previous warning that the UK stood to lose its AAA credit rating following a Leave vote.

The price of gold - a traditional safe haven during volatility - had its best day since 2009 rising 5%.

Meanwhile, oil slipped by $2, or 4%, with expectations that the shockwaves from a Brexit will limit global demand.