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Jun 24, 2016

DealBook Today's Top Headlines - June 24, 2016: Britain Votes to Leave EU

 
Friday, June 24, 2016
TODAY'S TOP HEADLINES
By AMIE TSANG
Britain has voted to leave the European Union, stunning the world with a historic decision that will reshape its place in the world, rattle the Continent and rock political establishments throughout the West, Steven Erlanger reports in The New York Times.

Prime Minister David Cameron, who led the campaign to remain in the bloc, announced that he would step down by October, saying the country deserved a leader committed to carrying out the will of the people.

The margin of victory startled many, with 52 percent of people voting to leave and 48 percent voting to remain in the bloc.

The value of the pound plummeted to its lowest level since 1985, and stock markets were roiled worldwide as they reeled from the uncertainty that the vote unleashed.

Investors fled volatility for haven assets, pushing up the Japanese yen. The flight for safety has exacerbated troubles for the Japanese government, which wants a weaker currency to spur exports and economic growth. It may also tighten credit as investors choose to put their money only in safe places like United States Treasuries, making borrowing costs higher for heavily indebted nations, like Greece, Italy and Portugal. Emerging markets may find it more difficult to secure investment, hampering their economic growth.

Few expect that Britain's departure from Europe will set off a full financial crisis like that seen after the collapse of Lehman Brothers in 2008, but no one knows enough to rule that out either, Peter S. Goodman writes in The New York Times.

Thomas Lam, the chief economist for industrialized countries at RHB Securities Singapore, said he expected global growth to suffer, while other countries would hold off doing business in Britain until the volatility subsided.

The euro followed the pound down, sinking to $1.1071 early in the European morning. Stock markets across Asia recoiled, as the Nikkei 225 plunged nearly 8 percent and shares of British banks plummeted on the Hong Kong stock markets.

European markets shuddered on opening, David Jolly reports in The New York Times. The FTSE 100 index in London fell 7.5 percent, led by shares in Barclays, which dropped 26 percent. The Euro Stoxx 50, a benchmark for eurozone blue-chips, fell 7.2 percent in early trading and the Dax in Germany opened down 8 percent. Yields on British and German government bonds slid, another indication of investors looking for the havens. The price of gold rose 6.6 percent.

Mark Carney, the governor of the Bank of England, pledged to support the financial system and the economy. He said the bank would "not hesitate to take any measures required to meet our responsibility." The central bank had earmarked 250 billion pounds, or about $344 billion, to unleash as needed for stability. Markets took some solace, as they continued to pare back their losses for the day. Mr. Carney added that the central bank, the Treasury and banks had done enough contingency planning to be well prepared.

The vote is likely to prompt multinational banks to shift significant numbers of jobs from Britain to competing financial centers in the European Union, led by Paris, Frankfurt, Dublin and Amsterdam. Many experts assume Brussels will move quickly to restrict trading of euro-denominated assets - a major business for Britain. Prominent banks including JPMorgan Chase and Citigroup have already warned that a decision by Britain to withdraw from the European Union would push them to transfer some operations elsewhere.

The impact of the vote will last well beyond the immediate tumult in the financial markets. Once Britain begins the formal process of withdrawal, it has two years to negotiate the terms under which it will leave and unravel its ties with Europe. Uncertainty now reigns, as the world reels in the face of this break-up. You can read our live updates in detail here.
MERGERS & ACQUISITIONS »
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INVESTMENT BANKING »
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For the latest updates, go to NYTimes.com/DealBook
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LEGAL/REGULATORY »
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