World Markets After The Brexit Referendum

Now that Brexit (British exit) is done and dusted with, the question that's intriguing most people's minds is how would Britain fare after its historical fallout with the European Union, or how are world markets doing post-Brexit? By voting out of the EU, the citizens of UK took a gamble that would put even seasoned online bookmakers drown in the sea of mediocrity. In this article, we'll be focusing on how world markets got impacted after Brexit, which also includes the United Kingdom, and what the future holds for them.

UK Economy

The UK manufacturing sector saw its lowest dips in the past three years. According to British purchasing managers, the sector is contracting - unlike manufacturing activities in the European Union that's still growing. The services industry is also exhibiting a gloomy picture. The service industry accounts for 80 percent of the country's economy, and no improvements are expected for the rest of 2016.

Business spending is also going down in the UK. Most of the chief financial officers (CFOs) of the bigger companies are planning to decrease hiring and capital spending as an aftermath of Brexit. In the European Union, on the other hand, economic confidence among consumers and businesses has stayed steady.

The pound sterling slumped to a historic low. Against the dollar, it was trading below $1.32 (3.5 percent dip) a few days after Brexit, which was its weakest position in the last three decades. According to S&P, the Brexit vote would hurt Britain economy, discourage foreign investments into the state, and make financing the existing large debt load of the country even harder. Simply put, the Brexit impact has made the uncertainty clouds above Britain's political and economic outlook difficult to exaggerate.

World Markets

Global markets were bound to feel tremors of the EU referendum. But unlike Britain, the negative impact didn't last too long and some have recovered well and are doing good ever since. This is largely because Britain doesn't trade a great deal with the world or its exports/imports don't account for much when viewed from a global perspective. But those who are close trading partners with the UK paid the price for Brexit.

Probably, the biggest non-UK victim was the United States. The Brexit fallout hurt U.S stocks badly with the Dow dipping by 261 points, which was the lowest it had ever slumped in the previous three months. Dow had lost another 610 points earlier, which pushed its combined loss at 871 points. This loss made the two days post-Brexit the worst phase for American stocks since August 2015.

However, according to traders across the globe, a feeling of calm returned to markets that were shaken by Brexit. Stocks rose in various markets, especially shares of industries that were hit the most - for instance, banks. Oil prices recovered as well, which were in the lows from February, 2016. According to a portfolio manager at a private investment bank, markets would likely stabilize post the recent downfalls, and Brexit's impact won't hurt the U.S., Europe and other regions across the world as much as it would hurt the UK.