Market reactions to what Brexit means for investors

The British public has voted to leave the European Union with a majority of 52 per cent. Prime minister David Cameron is to step down by October. While the full repercussions of Brexit are yet unknown, we outline some of the current market reactions.

In the wake of the referendum result, panicked investors reacted to the prospect of a UK recession and market turmoil and shares plunged to a record low as the FTSE 100 tumbled 530 points or 8.4 per cent in the first few minutes of trading.

The value of sterling plummeted by 10 per cent at one point to a 31-year low and may experience its biggest daily loss in history. This has been a rude awakening for many investors who had spent recent days buying sterling because opinion polls were showing a narrow lead for remain.

The effect of Brexit rippled through Europe, where Germany's Dax index and France's Cac index both fell by 10 per cent.

MARKET REACTIONS

Emphasising the global dimension of Brexit, the S&P 500 and Nasdaq are predicted to open down by more than 5 per cent. Meanwhile, the Japanese Nikkei was down 8 per cent.

With investors braced for turmoil in the near future, the demand for gold - which is favoured in uncertain times - has rocketed. The precious metal soared by 5 per cent.

We round-up market reactions to the referendum result, which address what implications are for investors.

Piers Hillier, chief investment officer at Royal London Asset Management

'On the back of this morning's result we expect the UK will fall into a recession. Unfortunately I see unstable market conditions lasting for between three and five years whilst new trade agreements are drawn up.

'It is our view that the UK government will be left with no choice but to stimulate the economy through fiscal and monetary means, flooding the system with liquidity if necessary.'

Alex Dryden, global market strategist at JPMorgan Asset Management

'Many traders and investors probably feel like they're choking on a fish bone right now.

'Today's steep market moves are reminiscent of the eurozone and financial crisis, although with the financial crisis, you saw the fortunes of the UK and US take a downward step together. This is a London centric story which explains the bigger swings we are seeing.

'The risks are idiosyncratic and concentrated around UK assets for now. Any domestic economic slowdown will hit UK small and mid-cap names and the FTSE 100 should outperform in the short to medium term.

'We're likely to see sustained volatility over the next couple of months as markets try to wrap their heads around the news and iron out the details.'

Tom Stevenson, investment director for personal investing at Fidelity International

'As expected, markets have reacted negatively to Britain's decision to leave the EU with the FTSE 100 already falling 8 per cent this morning. Markets dislike uncertainty and they now face this in spades.

'However, this is a moment for investors to take a deep breath and focus on their long-term investment goals.

'Hard as it may be right now for investors to remain calm, it is important to remember that market volatility is a normal part of long-term investing and with the benefit of hindsight some of the most turbulent times in stock market history are barely visible on a chart of the market's ups and downs.

'Over time the risk of holding equities is usually rewarded and markets invariably overshoot in both directions. Market falls are painful but they create opportunities to buy high-quality assets at attractive prices. I urge investors to avoid stopping and starting investments.'

Chris White, head of UK equities at Premier Asset Management

'The referendum result is likely to leave markets under a cloud. Sterling is already under pressure and equity and gilt markets are likely to remain volatile.

'Essentially we do not know what our terms of trade are going to be with our major trading partner, which represents about 50 per cent of our exports. Part of the UK's success over the past 40 years has been in terms of attracting foreign investment to our shores.

'Foreign investors have come here for many reasons, but one of the major reasons is that we are, and are seen to be, a gateway to Europe.

'For example, it is foreign investment that has built up our banking, financial services and automotive industries and it remains to be seen how these businesses react over the medium to longer term.

'It is likely that defensive stocks and multinationals will come to the fore, whilst financials and both consumer and industrial cyclicals will come under pressure.'

Anthony Cross, fund manager of Liontrust Special Situations fund

'Now the leave vote is in, we expect a period of uncertainty that will impact domestic consumer confidence and business investment within the UK.

'The likely fall in sterling will be a two-edged sword. It is a negative for companies that need to import goods or services but beneficial for those who export. Uncertainty in the run up to the referendum triggered notable falls in UK consumer sectors such as retailers and housebuilders.

'Looking at our portfolios, we have little exposure to these consumer businesses, nor do we own retail banks. We do however own UK-focused service and software companies that are reliant upon continued business and government investment.

'It is worth stressing that many of these companies have high contracted recurring income, which gives them a degree of insulation.

'We have a good number of exporting businesses in service areas and engineering that should benefit from sterling weakness. Overall, we expect a short-term sell off in equities with a greater impact felt among the mid 250 stocks and smaller companies.'

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