BREXIT VOTE: UK shares and pound continue to fall

UK shares have remained volatile in the wake of the Brexit vote, while the pound fell further against the dollar after Friday's record one-day loss.

The FTSE 100 index was down 0.4% at 6,111.42 in morning trade, although the decline was not as bad as some had feared.

Banks were badly hit, with Royal Bank of Scotland down nearly 9%.

The index had plunged more than 8% at one point on Friday before recovering some ground to close 3.2% lower.

Sterling was trading at $1.3460, down 1.8%, although this was above the low of $1.3228 hit on Friday.

On Friday, the pound had its biggest one-day fall against the dollar, at one stage sinking as low as $1.3236.

The FTSE 250 index, which mostly contains companies that are more UK-focused, was down 2.2%.

In a statement issued before the UK stock market opened, Chancellor George Osborne said the UK was ready to face the future "from a position of strength".

He also indicated there would be no immediate emergency Budget. Mr Osborne said there would still need to be an "adjustment" in the UK economy, but added it was "perfectly sensible to wait for a new prime minister" before taking any such action.

 

"Markets seem a little calmer this morning, which we can at least partially attribute to George Osborne's statement," said Joe Rundle, head of trading at ETX Capital.

"After going to ground since the vote, the chancellor's appearance indicates some much-needed continuity at the heart of government.

"Despite the prime minister's resignation and a swathe of Labour shadow cabinet departures, [Mr] Osborne doesn't appear to be going anywhere."

Haven asset

The price of gold rose on Monday, up 1.5% to $1,335.30, although it was below the two-year peak of $1,358.20 reached on Monday.

The gold price often rises in times of uncertainty as it is viewed as a haven asset.

On Sunday night Christine Lagarde, head of the International Monetary Fund, said that the UK's vote to leave the European Union had caught the financial markets by surprise.

But despite that, there had been "no panic" and the markets were "under control".

Tohru Sasaki, head of Japan market research at JPMorgan Chase in Tokyo, said falls in European markets would "not cause a financial crisis with the magnitude of the Lehman shock in 2008".

Stock markets plunged on Friday, with more than $2tn (£1.5tn) wiped off the value of global stock markets, according to Standard and Poor's Dow Jones Indices.

That was the biggest one-day loss in market value - even greater than the value wiped out following the collapse of Lehman Brothers during the 2008 financial crisis, Standard and Poor's calculated.

Next pressures

Traders will be watching the UK's financial position closely over the coming months.

Jeremy Cook, chief economist at World First, said: "We are still looking for another 10% fall for the pound against the dollar in the coming months as data confirms the economic slowdown and monetary policy expectations increase.

"The funding position of the UK, with its twin current account and fiscal deficits, are the next pressures to weigh."

The UK's current account deficit measures the balance of trade, investment income and money transfers.

That deficit means that the UK must borrow to pay its way in the world.

The fiscal deficit refers to the gap between government expenditure and income that has to be financed by borrowing.