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Category: Markets / Referendums / World Politics

Obama moves to quell US market uncertainty after Brexit vote

Saturday, 25 Jun 2016 04:52:45 | Michael Vincent

Barack Obama talked up the fact the UK remained in NATO. (Reuters: Kevin Lamarque)

Markets like certainty, and the UK leaving the EU after four decades has just created a lot of doubts.

Key points:

  • Barack Obama says US respects Britain's decision to leave the EU
  • Says Brexit vote speaks to challenges raised by globalisation
  • Traders say they believe exit will be smooth and markets will rebound after falls

US President Barack Obama issued a statement just before the stock exchange opened for the day's trading, saying the US respects the UK's decision and talking up the fact that Britain will remain in NATO.

His statement ended on the impending negotiations for the new relationship, voicing the hope that they would "ensure continued stability, security and prosperity for Europe, Great Britain and Northern Island and the world".

With that, the markets opened and plunged almost 3 per cent

Later in the day, Mr Obama took part in the seventh Global Entrepreneurship Summit at Stanford University's campus in Silicon Valley — he had this message for his nation and the world:

"I do think yesterday's vote speaks to the ongoing changes and challenges raised by globalisation."

As the markets stayed in the red, people on Wall Street were not surprised.

"I think it's an emotional response right now given that the agreements have two years to unwind between the EU and Britain. I think it will be a smooth exit eventually," said one banker who watched events unfold.

To put today in perspective, last August the US markets plunged 6 per cent on the shocks from China's stock market crash.

Let alone the great recession of 2008 which wiped out entire banks.

'It's not as bad as 2008', veteran trader says

While the US economy is insulated for the moment, experienced high-profile traders like Jon Najarian realise there are knock-on implications in the short term for other nations.

"Obviously Japanese Yen [is] making about a 4 per cent move today. Big move for the Yen. Not good for [Japanese Prime Minister Shinzo Abe] and what [Governor of the Bank of Japan Haruhiko Kuroda] would like to happen over there in Japan," he said.

"Similarly I won't be surprised if our currency, the dollar, strengthens a little, but I don't know if it's long-lived.

"So I think overall we'll be fine, the world will be fine, but I think people aren't happy with the unknown and that's why they're getting to the sidelines.

"I'm not saying you buy every dip, but it's not as bad as 2008 or any of these end-of-the-world scenarios."

US markets now have a break over the weekend to consider the future implications of this historic decision.

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