The decision of Great Britain to quit European Union and become independent has put European financial market in a crisis similar to the global financial crisis of 2007 and 2008. Brexit will aggravate the situation further and may end up reinforcing the already prevailing deflationary trends.
Brexit will severely test the continental Europe’s banking system which is yet to recover from the financial trouble. Soros, world’s richest men and financial investor shared that the political and ideological disagreements are standing in the way of solution for the financial crisis situation.
Devastating Effects on the Stock market
The decision to quit the EU Union has caused havoc for British currency, which has slumped to the lowest $1.3121 in the 31 years after the result. The European stock market index went through the worst decline in more than 7 years. The haven assets purchased by the financial investors sent the yield on 10-year UK government bonds below 1% for the 1st time and the 10 year US Treasury yields to the worst level in the four years.
Companies such as Dow Jones Industrial Average and S&P 500 experienced the worst month declining 260.51 points to 17140.24, since the start of this year due to the two day decline in the global stock market.
The financial traders shared that despite the unknown events such as the Britain’s political leadership, future with EU and impact on the business confidence and investment in Europe, selling of shares in the stock market remained organized.
The european stock market index lost 871 points in two sessions to close at the lowest level on Monday since march 2010. In addition to Dow Jones Industrial Average, the Nasdaq Composite reduced to 113.54 points, the S&P 500 to 36.87 points and the Stoxx Europe 600 lost 11% after the decline of Thursday’s referendum.
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