(CN) – Global stock markets lost more than $2 trillion in value on Friday after Briton’s voted to leave the European Union, setting the stage for an uncertain and volatile week ahead in politics and finance.
U.S. stocks alone lost $830 billion in valuation, with $657 billion in value evaporating in a matter of hours from the S&P 500, a stock market index based on 500 large companies with common stock listed on either the New York Stock Exchange or NASDAQ.
The skid continued on Sunday in the Middle East, where financial markets opened for the first time since the outcome of the British vote was announced. Like their counterparts in the rest of the world, investors in the Middle East expected the UK to remain in the US.
When voters decided differently, a wave of uncertainty swept the financial sector.
The Saudi Tadawul stock exchange, the region’s largest, closed down 1.1 percent. Meanwhile Egypt’s EGX 30 stock market index tumbled a full 5.54 percent.
Other Mideast markets, such as those in Abu Dhabi and Dubai fell somewhere in between in their respective loses.
While all was going on, oil prices also sank, with the benchmark U.S. crude dropping 4.9 percent to close at $47.64 a barrel. The price of Brent crude also fell by 4.9 percent, with the price bottoming out at $48.41 in London before markets closed on Friday.
Britons voted 52 to 48 percent Thursday in favor of ending their country’s 43-year membership in the 28-nation European Union. No country has ever left the EU before, and economists blamed most of Friday and the weekend’s financial gyrations on knee-jerk reactions to a wholly unexpected outcome.
Britain has yet to formally notify the EU of how it hopes to proceed, but early indications are that it envisions an orderly exit to be culminated by 2019 or thereabouts. However, senior EU politicians demanded Saturday that the Britain get on with it and quickly cut its ties with the 28-nation bloc.
“There is a certain urgency … so that we don’t have a period of uncertainty, with financial consequences, political consequences,” French Foreign Minister Jean-Marc Ayrault said at a meeting in Berlin of the EU’s six founding nations Germany, France, Italy, Luxembourg, Belgium, and the Netherlands.
EU Commission chief Jean-Claude Juncker warned that the split was “not an amicable divorce” but noted it was never “a tight love affair anyway.”
“I don’t think the news came out with enough lead time to have institutional investment committees sit down and decide what to do,” said Thierry Albert Wizman, a strategist with Macquarie. “This is an automated response to what has happened. Human decision making will intervene.”
In the meantime, European central bankers met over the weekend in Basel, Switzerland for a pre-scheduled meeting, but the potential fallout from the UK referendum was reportedly the sole focus of their discussions.
The Bank of England, Federal Reserve and European Central Bank have all pledged to provide additional liquidity to financial markets in the aftermath of the UK’s vote — reviving foreign exchange “swap lines” first formulated at the height of the 2008 financial crisis.
British prime minister David Cameron will address parliament for the first time since the vote on Monday, with both his Conservative party and the Labour opposition ensnared in bitter leadership battles.
Cameron’s resignation on Friday set off an intense, chaotic campaign by several individuals intent on replacing him as Tory leader in time for the party conference in October.
The candidacy of former London Mayor Boris Johnson picked up critical backing Sunday with the endorsement of Michael Gove, the UK’s justice secretary.
Both men are former journalists and both were vocal proponents of the “Leave” campaign.
However, shades of the GOP establishment’s “stop Trump” campaign in the US, there is also a movement afoot among Cameron’s allies to find and promote an “anyone but Boris” candidate.
In Scotland, meanwhile, first minister Nicola Sturgeon called emergency meeting of the Scottish cabinet to discuss a fresh independence referendum to take place within two years. Afterward, Sturgeon said her semi-autonomous administration would seek immediate talks with EU nations and institutions to ensure that Scotland could remain in the bloc.
“(We will) explore possible options to protect Scotland’s place in the EU,” she said after meeting with her Cabinet in Edinburgh, adding that a new referendum on Scottish independence is “very much on the table.”
Scotland voted in 2014 to remain a part of the U.K., but that decision was seen as being conditional on the UK staying in the EU.
One new headache he will have to address are statements made by Jonathan Hill, the British Conservative party politicians who resigned this weekend as EU commissioner for financial services.
Hill predicted that London’s financial sector, a cornerstone of the British economy, will take a significant hit as a result of the “leave” vote, and that it will lose its voice in European rulemaking for the financial services industry.
Hill said without a representative at the table, London’s banks and financial services sectors will be force to abide by European banking rules promulgated in Berlin and Paris and elsewhere in the EU.
Several big banks, including HSBC, JPMorgan Chase and Goldman Sachs have reportedly begun preparations for a potential shift of some operations to Dublin, Paris and Frankfurt.
The Obama administration has also dispatched Secretary of State John Kerry to Brussels an London to discuss the unfolding crisis, and on Tuesday, David Cameron will meet his 27 EU counterparts in Brussels to begin hammering out a timetable for Britian’s departure.
In advance of the meeting, German chancellor Angela Merkel, French president François Hollande and Matteo Renzi, Italy’s prime minister met Sunday to discuss their positions and how to calm the waters roiled by the split.
Photo caption 1:
Traders Gregory Rowe, right, and Fred DeMarco work on the floor of the New York Stock Exchange, Friday, June 24, 2016. U.S. stocks are plunging in early trading after Britons voted to leave the European Union. (AP Photo/Richard Drew)
Photo caption 2:
Clouds gather above the Houses of Parliament on the banks of the river Thames following yesterday’s EU referendum result, London, Saturday, June 25, 2016. Britain voted to leave the European Union after a bitterly divisive referendum campaign. (AP Photo/Tim Ireland)
Photo caption 3:
The Foreign Ministers from EU’s founding six Paolo Gentiloni from Italy, Didier Reynders from Belgium, Jean-Marc Ayrault from France, Bert Koenders from the Netherlands, Frank-Walter Steinmeier from Germany and and Jean Asselborn from Luxemburg, from left, walk away from a group photo prior to a meeting to talk about the so-called Brexit in Berlin, Germany, Saturday, June 25, 2016. (AP Photo/Markus Schreiber)
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