BEIJING — The pound fell further against the dollar and U.S. stock index futures slipped Monday as investors continue to digest the implications of Britain’s historic vote to leave the European Union. But Tokyo’s main share index recovered some ground after Friday’s sharp sell-off.
On Friday, the British pound registered its biggest one-day drop and world stocks saw more than $2 trillion wiped off their value amid fears that the British vote in favor of what is popularly known as Brexit could plunge the globe back into a recession.
At about 3 a.m. Greenwich Mean Time on Monday morning, the pound was trading at 1.34 to the dollar, a decline of just over two percent from Friday’s close, while U.S. S&P 500 mini futures were down 0.5 percent at 2,009.
The picture in Asian markets was mixed. Tokyo’s Nikkei 225 index rose 1.4 percent in a partial recovery from Friday’s sharp 7.9 percent decline. But MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.6 percent, with the financial sector shares and companies with British exposure the worst hit.
“The question that needs to be asked: Is this a shock, or the start of something more like a crisis?” said Chris Weston, chief markets strategist at IG in Melbourne, Australia.
Central bank chiefs and policymakers around the world have tried to calm the jitters, but there remains a distinct possibility that more selling pressure will emerge this week as the news continues to sink in.
Nevertheless, trading on Monday was relatively calm, without any sign of the panic that had spread through global markets Friday.
“Financial markets suggest people aren’t worried about a real negative spiral,” said Tom Condon, head of Asian research at ING Group in Singapore. “It’s a minor negative, but we are not talking about a global financial crisis negative. We are seeing much less of an adverse impact than the Chinese devaluation last August.”
On Sunday, Chinese Finance Minister Lou Jiwei said the vote “will cast a shadow over the global economy.”
“It’s difficult to predict now,” he said at the first annual meeting of the Asian Infrastructure Investment Bank in Beijing. “The knee-jerk reaction from the market is probably a bit excessive and needs to calm down and take an objective view.”
The pound fell as much as 10 percent on Friday to its lowest level against the dollar in three decades, with ratings agencies warning that Britain’s credit rating could suffer, and investors worried that Brexit could undermine London’s role as a global financial center. London’s main stock market index sank nearly 9 percent in early trading on Friday, before recovering to end 3.15 percent lower.
The shock waves reverberated around the globe. European markets fell 7 percent on average, the biggest one-day drop since 2008, with France and Germany not escaping the carnage.
In the United States, stock markets suffered their largest sell-off in 10 months. The Dow Jones industrial average closed down 3.4 percent. The broader Standard & Poor’s 500-stock index closed down 3.6 percent, and the tech-heavy Nasdaq composite index ended 4.1 percent lower.
Britain faces months of political uncertainty after Prime Minister David Cameron, who had called the referendum but campaigned for Britain to stay in the E.U., pledged to step down in October. Opposition lawmakers from the Labour Party attempted to unseat their leader, Jeremy Corbyn, citing his failure to mount an effective campaign for Britain to stay in the E.U., while more than 3 million Britons signed a petition calling for a second referendum.
Adding to the uncertainty, an opinion poll showed a strong majority of Scots want to break with the United Kingdom, while Nicola Sturgeon, leader of the Scottish National Party, even raised the possibility of blocking the legislation needed for Britain to exit the E.U.
But the economic uncertainty could drag on for years, with Cameron’s successor facing complex negotiations to leave the world’s largest trading bloc and forge new trade deals around the world. Some economists predict that the British economy could tumble into a recession next year.
“A lot of issues in the U.K. are not going to be resolved anytime soon,” said IG’s Weston. “For sterling to rally, you want to see some certainty. Otherwise every rally is just an opportunity to sell.”
U.S. Secretary of State John F. Kerry urged Britain and the E.U. on Sunday to manage their divorce responsibly for the sake of global markets and citizens.
He is due to meet E.U. foreign policy chief Federica Mogherini in Brussels and British Foreign Secretary Philip Hammond in London on Monday. He said he would bring a message of support to both capitals.
“The most important thing is that all of us, as leaders, work together to provide as much continuity, as much stability, as much certainty as possible,” Kerry said as he met in Rome with Italian Foreign Minister Paolo Gentiloni. Although the United States regrets the Brexit decision, he said, there are ways to “minimize disruption” in the marketplace.
