Asian stocks fell and the British pound tumbled more than two per cent on Monday as markets struggled to shake off deep uncertainty sparked by Britain's decision to leave the European Union.
Sentiment remained weak even though the worst of the turmoil seen on Friday, when global stock markets suffered their biggest decline in nearly five years, had eased.
"Things are so uncertain that investors still do not have a clear idea how much risk assets they need to sell," said Hiroko Iwaki, senior foreign bond strategist at Mizuho Securities.
"But it is safe to assume investors are not yet with done all the selling they need to. I wouldn't be surprised to see another 10 per cent fall in share prices," she added.
Among many questions the British exit — or Brexit — has triggered are just how much U.K. and European economies will slow, how they will negotiate their new relationship and how European leaders will try to boost the crumbling European Union.
U.S. S&P mini futures, the world's most traded stock futures, fell 0.4 per cent to 2,011.50, hovering close to Friday's 3-½-month low of 1,999.
MSCI's broadest index of Asia-Pacific shares outside Japan shrank losses to 0.6 per cent as companies with UK exposure in particular came under more pressure.
Financials led declines in Australia and Hong Kong with the sector seen the among worst hit by Brexit and the prospect of London losing its prized "EU passport."
"We think Brexit could just be the first surprise in a re-calibration of the world away from globalization towards more inward looking policymaking," Ajay Singh Kapur, equity strategist at Bank of America Merrill Lynch in Hong Kong, wrote in a note.
"Brexit has now possibly opened up more uncertainty about the European Union project, and that the already beated down Asian and emerging markets equity markets could receive asset allocation flows from Europe," he added.
Japan's Nikkei extended gains to 1.9 per cent, a partial rebound after Friday's hefty 7.9 per cent fall. Japanese stocks were helped by stronger warnings from Japanese officials that they may intervene in currency markets to stabilise the yen.
Still, the dollar fell 0.3 per cent against the safe-haven yen, trading around 101.81 yen.
Chinese shares also gained, with the CSI 300 index and the Shanghai Composite both up about 0.8 per cent.
The British pound fell two per cent to $1.34, still some distance from the 31-year low of $1.3228 touched during Friday's wild trade.
Euro also under pressure
The euro also came under further pressure, falling 0.8 per cent against the dollar, as investors fret Brexit could stoke the anti-establishment mood in Europe and even talk of disintegration of the union.
"[There will be] sell-off in the euro as talk of other exit referenda builds," said Jerome Booth, chairman of New Sparta Asset Management in London.
"This sell-off will be more profound and long-lasting and will be not just against the dollar and yen but also against the pound. It will also raise fears of significant loss of values for holders of Euro-zone government bonds."
The euro fell to $1.1028, edging closer to Friday's 3-½-month low of $1.0912.
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