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Brexit’s impact so far on global markets

27th October 2016 Print

The impact the referendum has had on the economy is not simply limited to the UK.  Global business is so interconnected and Britain is one of the major economies of the world, so the markets worldwide have had uncertainty and changes since the Brexit vote.

What happened in the UK market?

The first victim of Brexit was the pound, which plummeted almost overnight to its lowest value for 30 years. What this meant is that large companies who trade internationally reaped some benefits from the lower value pound, since domestic costs would be reduced. However, exporting has also increased.  UK stocks have been in flux, as has the exchange rate.

Despite the vote, the UK has not slipped into recession and there has been an increase in the economy this quarter.

How are global markets affected?

Essentially, the changes to the UK markets mean UK consumers and businesses have cut spending on imports from abroad, which has slowed global markets down. Britain import a lot from countries like China and Japan, so the Brexit vote caused a negative impact on Asian stock markets. Deciding what to invest in and where to place funds has never been so volatile, which means professional guidance is necessary. One such company is ETX Capital, who offer spread betting services and education into stocks and shares for investors who wish to capitalise on this volatility.

Many investors decided to move their investments to “safe haven” assets, including gold, jewellery, Japanese yen and U.S. Treasury bonds. As a result, all of those assets have risen in value and their considered stability means they are likely to continue to do so.

How about the US?

Brexit’s impact on the U.S. stock market has been tumultuous. Immediately following the result all major U.S. indices declined by about 5%. However, this changed quickly and in early July, an all-time high was recorded in the S&P 500 index. 

This lowered effect in the US is in part due to its isolated economy.  Around 15% of GDP is from trading internationally, which is relatively low. Additionally, investors in the US were anticipating an increase imposed by the Fed, which put on hold post Brexit. Therefore, the US market is open to rise further.