Financial markets were rocked yesterday as referendum jitters wiped around £30bn off the value of the UK’s top companies and sent investors fleeing for safe havens.
The FTSE 100 crashed below the 6,000 mark, ending the day at 5,923 – its lowest finish since 24 February. The blue-chip index has now lost six per cent – or £100bn – in the last four days of trading.
Sterling was also shaken, plunging by nearly one per cent to around $1.414 after a number of new opinion polls showed the Leave side pulling ahead with just eight days to go until the In/Out vote.
Surveys from both YouGov and TNS gave the Leave side a seven-point lead over Remain, while two separate online and telephone surveys from ICM both had the Brexit camp four points up.
The pound has now shed four cents against the dollar in just seven days as implied volatility in sterling shot up to levels not seen since the financial crisis.
“Panic appears to be gripping markets … The phrase ‘sea of red’ has never seemed more appropriate,” said Chris Beauchamp, senior analyst at IG.
The contagion spilled over to other European markets, which also closed sharply down. The Eurostoxx 50 lost two per cent, the Cac 40 in France tumbled by 2.3 per cent and the German Dax lost 1.4 per cent.
In the dash for safe assets, yields on government borrowing costs tumbled as demand for sovereign-backed debt boomed.
The 10-year UK bond shed more than 0.08 percentage points to 1.12 per cent, its lowest on record.
The yield on German 10-year debt turned negative for the first time, hitting minus 0.03 per cent at one point during trading.
“We’re seeing the typical safe haven effects which happen when markets get nervous. We see a shift away from risky assets towards assets like government bonds,” said Kallum Pickering, an economist at Berenberg.
“We had a very similar wobble 10 days out from the Scottish referendum,” added Simon French, chief economist at Panmure Gordon.
The price of gold, another safe haven, reached a near six-week high, extending a winning run. The yellow metal touched $1,289.80 per ounce during trading. Reuters reported that gold priced in sterling reached £913.09 – close to a three-year high – as the pound collapsed further.
It was also revealed yesterday that the European Central Bank (ECB) is preparing to hold emergency conference calls and issue a fresh “whatever it takes” declaration as soon as the result of the vote is announced on 24 June.
Reuters reported that a senior official said the ECB was ready to let banks get their hands on unlimited euros and sterling to ensure the financial markets do not seize up should the UK vote to leave.
The move would “take some of the risk off the table,” said Jasper Lawler, an analyst at CMC Markets. “However, the extra wash of liquidity would be another reason to excite gold bugs.”
The first of the Bank of England’s special referendum liquidity auctions, however, received only muted demand from UK-based banks, who swapped £2.5bn worth of assets for cash reserves.