World stocks tumble as Britain votes for EU exit

NEW YORK - Global capital markets reeled on Friday after Britain voted to leave the European Union, with $2 trillion in value wiped from equity bourses worldwide, while money poured into safe-haven gold and government bonds. Sterling suffered a record plunge to a 31-year low.

The blow to investor confidence and the uncertainty the vote has sparked could keep the Federal Reserve from raising interest rates as planned this year, and even spark a new round of emergency policy easing from major central banks.

The move blindsided investors, who had expected Britain to vote to stay in EU, and sparked sharp repricing across asset classes. Mainland European equity markets took the brunt of selling as investors feared the vote could destabilize the 28-member bloc by prompting more referendums.

The traditional safe-harbor assets of top-rated government debt, the Japanese yen and gold all jumped. Spot gold rose nearly 5 percent and the yield on the benchmark 10-year U.S. Treasury note fell to lows last seen in 2012.

Stocks tumbled in Europe. Frankfurt and Paris each fell 6 percent to 8 percent. Italian and Spanish markets, and European bank stocks overall, were headed for their sharpest one-day drops ever.

London's FTSE, however, dropped 2.3 percent, with some investors speculating that the plunge in sterling could benefit Britain's economy.

'This is an historic event and will not be swept under the rug very quickly,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

'That said, markets will not remain in turmoil as they are at the moment for an extended period of time. There is no indication that the global financial markets are anywhere near a meltdown as we saw in 2008. The UK will not collapse and the EU will not collapse anytime soon.”

Still, Britain's big banks took a $100 billion battering, with Lloyds, Barclays and RBS plunging as much as 30 percent, although they cut those losses in half later in the day.

Stocks on Wall Street opened more than 2 percent lower, with the Dow Jones industrial average dropping as much as 538 points.

Investors were pricing in less chance of another hike in U.S. interest rates given the Federal Reserve had cited a British exit from the EU as one reason to be cautious on tightening.

'A July (hike) is definitely off the table,” said Mike Baele, managing director with the private client reserve group at U.S. Bank in Portland, Ore.

Fed funds futures were even toying with the chance that the next move could be a cut in U.S. rates.