On June 23, 2016, the people of Great Britain shocked the world – contrary to all polls, they voted to leave the European Union. They were only the first of many countries to talk about leaving the EU, the first to do a referendum on the issue, but many more are already stating – mere hours after the results of the referendum were known – that they will follow in Britain’s footsteps.
Among the first was France, with Marine Le Pen, leader of the French National Front (Front National), saying that now it is France’s turn. She talked about the four fundamental freedoms that have been usurped by the European Union, that France needs to restore – monetary and budgetary souvereignty; economic, territorial and legislative souvereignty. Marine Le Pen stated that the UK had started a movement that will not stop. She was joined by many other political leaders from other European countries, including Hollamd, Denmark, Germany, Hungary and Italy, among others.
The effect on the stock markets around the world was swift – Japan’s Nikkei plunged by 7.9%, South Korea’s stock market fell by 4%, markets all around Europe moved to the downside – from France (down 273 points, or 6.24%), through Germany (-699 points, 6.82%), to Switzerland (down 2.6%). In fact, the British stock market’s loss was lower (3.15%) than the French stock market. Among the reasons for this: the fall of the British pound (the biggest one-day fall in more than 30 years), which is beneficial for British manufacturing; and the concerns of French manufacturers exporting to Britain (many of the French car manufacturers, such as Renault, for example, sell as mich as 20% of their vehichles in Great Britain – a trade that will now have to be renegotiated).
The North American stock markets were not spared as well – Dow Jones lost more than 610 points (3.39%), NASDAQ fell by 202 points, the Canadian stock market, the TSX, shed 239 points (-1.69%), and Canadian bond yields had their biggest fall in history.
The total losses on the world stock markets today, in one day only, were worth more than $2.08 trillion. That’s trillion with a “T”.
It is dificult to foresee the long-term consequences of the Brexit for both the European Union and the world stock markets. From what we have seen so far, however, there is little hope for improvement.