As Britain recently voted to exit the European Union, traders across the world pulled out $2.1 trillion in investments in a single day, according to S&P Dow Jones indices data. Such a situation was last witnessed during the global economic crisis, said AFP.
The new threat to an already slow global economy drove investors to safer investment instruments such as gold, Japanese Yen and premier bonds.
Bourses across Paris, Tokyo, Frankfurt, London and New York witnessed fall in the range of 3 to 8 percent. India's Sensex also closed 2.24 percent lower than the previous day. The Press Trust of India reported that the total investor wealth (as cumulative market value of all listed stock) fell by nearly 1.79 lakh crore ($26 billion).
Even as most countries' central banks promised to inject liquidity into the countries' financial markets, in case of disorderliness, currencies, including the British Pound, hit record lows after crashing 9.1 percent against the U.S dollar, said AFP. The Euro fell 2.6 percent and the Indian rupee by 1.06 percent reaching a four-month low. The Yen, the only saviour, shot up by 4.2 percent against the dollar.
Gold, the safest asset to hedge, also saw a near five percent increase in the international market, as equity bled white on bourses. In India, it stood 6 percent higher breaking a three year record. The U.S. and German treasury bonds saw their 10-year yields drop to record low.
"The vote is creating a tremendous amount of uncertainty. Uncertainty often freezes expansion decisions... it means that the global economy will grow more slowly," James Chessen, chief economist at the American Bankers Association, told AFP. Analysts highlighted it could also lead to slow growth in the U.K.'s trade and investment and also push the country to another recession.
India's economic affairs secretary Shashikanta Das in an interview with the Economic Times said major concerns remained the volatility in importantly the currency and stock markets across the world. He noted, India's market were not an exception, however, Indian markets would stabilise earlier than others as is being reflected already in its normalising rupee value and stock market.
Das added that India might not face much difficulty due to its strong economic growth (and prospects) and an attractive investment destination along with $360 billion of forex reserves.
