U.S. stock futures tumbled, as ongoing vote tallies showed that British voters have decided to leave the European Union.
S&P 500, Nasdaq futures lost more than 5% with Dow futures crashing 700 points. Meanwhile the U.K. FTSE 100 was indicating an 8.7% loss. The pound crashed 10.5% to a 30-year low vs. the dollar after hitting a 6-month high earlier Thursday. In Japan, the Nikkei crashed nearly 8% after triggering circuit breakers, as the yen hit multi-year highs. Gold and U.S. Treasuries also rallied on safe haven flows, while crude futures sank 6%.
Central banks have sounded the alarm over a potential Brexit, with chiefs of the Fed, Bank of Japan and Bank of Canada all citing the vote as a potential disruption to the global economy. Yellen said yesterday the decision could have consequences for financial markets, and "in turn for the U.S. economic outlook." The International Monetary Fund had warned that a so-called Brexit risked damage to the U.K. economy.
"Risk-off is back," Joe Quinlan, chief market strategists at U.S. Trust, Bank of America Private Wealth Management, said by phone. "We've got a fragile, weakening economy and the last thing we need is for one of the stronger developed economies to falter. If it's a leave vote, you just chipped away a little bit at global growth for the next 12 months."
Polling before the referendum had indicated a vote too close to call. By 4:15 a.m. in London, 560,000 more votes had been cast for a so-called Brexit than for staying. Results counted suggest London and Scotland are largely voting "Remain," while the rest of the country is mainly in the "Leave" camp.
Futures contracts on the CBOE Volatility Index soared 53 percent in after-market trading, after the VIX plunged the most since 2013 Thursday. Equity futures and other risk assets had climbed earlier after a YouGov poll showed support for remaining stood at 52 percent, while a separate survey conducted by Opinium indicated a slight lead for the Leave camp.
Final results for the U.K. vote are due at about 2 a.m. on Friday. An analysis by JPMorgan Chase & Co. indicated a 51.1 percent chance of a Brexit, according to a client note.
The equity gauge could plunge as much as 7 percent in the event of a Brexit, Bank of America Corp. strategists led by Savita Subramanian wrote in a note prior to the referendum. A vote to remain would weaken the dollar and boost crude prices, spurring a 3 percent to 4 percent rally in U.S. stocks, they said.
The vote comes at a time when uncertainty already plagues U.S. stocks, with questions around the Fed's ability to stoke growth, the fall elections, a four-quarter decline in corporate profits and price-earnings ratios that are close to a decade high. The S&P 500 plunged 11 percent in its worst-ever start to a year before recovering through April. It's virtually been stuck in place since, struggling to hold above the 2,100 level that has capped three rallies since November.
