Britain has stunned the world by voting to leave the European Union.
Financial markets were expecting the opposite result in the UK’s historic referendum and so the shock waves have been enormous, led by the 10% devaluation in Sterling against the US dollar but also triggering huge sell-offs in equities markets, including in Australia.
The ASX crumbled more than 3% in broad-based selling, with the major banks down more than 3.5%.
The Australian dollar was pummeled, collapsing from an earlier high above US76c to US73.6c a short time ago – an enormous fall for a day’s trade.
Prime minister Malcolm Turnbull, who leads the Coalition to an election in eight days’ time, spoke earlier about the result and the market fallout. Here’s an excerpt of what he said:
This is a momentous and historic decision and we respect the wishes of the British people, expressed through this referendum. I want to say that Australians, I recognise, will be concerned by the uncertainty and instability in global markets, falls in currencies, including the Australian dollar and in equity markets.
It is important to remember that the Australian economy is strong and resilient and has weathered global shocks before and weathered them well.
I have no doubt that in due course, the British Government will negotiate a satisfactory departure from the European Union. This could take several years. In the meantime I have no doubt that our relations with the United Kingdom, which are as close as any two nations’ relations could be, will continue as positively and intimately as ever.
Equally, with Europe, we have been negotiating a European Free Trade Agreement, we have built strong ties with the countries of continental Europe, in particular France and Germany. I’m very confident that our negotiations towards a Free Trade Agreement with the European Union will continue.
So there is no cause for Australians to be alarmed by these developments. However, there will be a period of uncertainty and some instability in global markets. I’ve no doubt that European leaders will provide reassurance and leadership that will in due course, settle many if not all of those uncertainties.