Investors around the world went into crisis mode as British voters chose to leave the European Union in a stunning decision with far-reaching implications.
U.S. stocks followed plunging global markets, opening sharply lower. The Dow immediately shed over 520 points, while the S&P 500 lost 2.6% and the Nasdaq dropped 3.6%.
The British pound plummeted close to $1.33, its lowest level in more than 30 years, as the results of the referendum became clear. It’s now trading down around 9% near $1.37. The euro also fell heavily.
Investors are already concerned about cash drying up in global financial markets.
“Britons delivered a bombshell to the markets,” says Chris Gaffney, president at EverBank World Markets, a firm headquartered in Florida. “This is the biggest risk to markets right now — a possible lack of liquidity like we got during the Lehman crisis.”
In the final count, 51.9% voted to leave the union. Many investors had been betting on Brits choosing to stay. The surprise outcome caused immediate political shock waves, prompting Prime Minister David Cameron to announce his resignation.
Jean-Claude Trichet, a former president of the European Central Bank, called the vote “an earthquake.”
Stocks got hammered amid the panicked mood. Shares in London got off to a brutal start before recovering some ground to trade around 5% lower. A broad gauge of European blue-chip stocks index sank around 6.5%.
Bank stocks took a particularly heavy hit as multiple lenders across Europe nosedived more than 15%. Central banks in the U.S., U.K. and the eurozone said they were ready to provide support as needed.
After wild swings in Asian trading, Japan’s Nikkei plummeted 7.9%. The Hang Seng in Hong Kong dropped 2.9%. U.S. stock futures are also sharply lower, with the Dow projected to tumble more than 500 points at the open.
“Everybody’s obviously a little bit stunned,” said Andrew Sullivan, managing director of sales trading at Haitong International Securities in Hong Kong. “Equally, I think there have been people who are looking to take advantage of the situation as and where they can.”