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BREXIT: What It Means For The World And Us

BREXIT: What It Means  For The World And Us
July 02
08:05 2016

The UK Independence Party which won the last general election in May of 2015 campaigned for Britain’s exit from the European Union (EU).

The reason was because EU imposed too many rules on business and charged billions of pounds a year in membership fees for little in return.

They also wanted to take back full control of its borders by reducing the number of immigrants.

Brexit in short for the United Kingdom (UK) leaving the European Union (EU) voted on June 23 and the referendum turnout was 71.8 per cent, out of this 52 per cent voted to leave the EU while 48 per cent voted to stay.

This move will take two to three years and UK can expect weaker investment and slower economic growth during this period of negotiations.

The European Union on the other hand wants them to leave as soon as possible so that the stock market can stabilise again, at the moment there is too much volatility.

Reuter’s news stated that: “The US$2.08 trillion dollar loss across global equity markets was the biggest one-day fall ever, according to Standard & Poor’s Dow Jones Indices, trumping the Lehman Brothers bankruptcy during the 2008 financial crisis and the Black Mondaystock market crash of 1987.”

Lead-up to vote

Leading up to the referendum vote, US stocks rallied, led by bank shares as Wall Street bet strongly that Britain will remain part of the European Union, potentially avoiding a hit to European trade and its consequences to global economic growth.

The poll showing that Britain will vote to remain also strengthened the pound to its highest level of 2016, it rose by around 0.75 per cent to $1.4998 against the dollar.

Gold on the other hand fell to a two-week low to $1,257.91.

 

After the vote

After the referendum vote, the Dow Jones industrial average fell by 3.39%, the S&P 500 fell by 3.6% and the Nasdaq Composite fell by 4.12%.

Japanese stocks suffered their biggest daily fall in more than five years, the Nikkei ended down 7.9%.

The pound fell by 8.1% against the US dollar, at $1.3662, its weakest in 31 years.

Gold soared as much as 8% to its highest in more than two years sending investors scurrying for protection in bullion and other assets perceived lower risk, spot gold peaked at $1,358.20 per ounce and was up 4.9%.

According to data from investment bank Jefferies, around $4.31 billion pounds has flowed out of U. K. equities alone over the past eight weeks.  Investors are seeking “safe havens” like the United States (US) greenback, the Japanese yen and gold.

Ratings agency Standard & Poor have cut Britain’s credit rating from triple-A to AA and S & P was the last of the ratings agencies to cut Britain’s sovereign credit rating from triple-A.

nThis is an informative publication, sponsored by The Fiji Sun, Fiji Bureau of Statistics and HFC Bank. All views expressed or implied are purely of the Treasurer at the HFC Bank, Peter Fuata.

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