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Brexit

Dow slammed again on 'Brexit Blues,' drops 260 points

Adam Shell
USA TODAY

Wall Street is suffering from a serious case of the "Brexit Blues."

The hangover from the United Kingdom's decision to exit the European Union continued to weigh on risk assets around the world Monday, with U.S. and European stocks falling sharply for a second day.

With uncertainty at very high levels and investors still unsure how the shock of Friday's "Brexit" vote will play out in the global economy and markets, the so-called "risk off" trade remained in force for a second straight trading session since the Britain "Leave" vote caught investors by surprise.

Lori Calvasina, chief U.S. equity strategist at Credit Suisse told clients in a note that it is "far easier to identify things we want to sell than things we want to buy at the moment." Longer-term she does see opportunities in hard-hit stocks.

The Dow Jones industrial average, which was off as much as 335 points earlier in the session, closed down  260.51 points, or 1.5%, to 17,140. On Friday, the Dow tumbled 610 points, its eighth-worst one-day point loss in its history. The blue-chip index has racked up a 2-day loss of 871 points, the worst 2-day drop since late August.

The Standard & Poor's 500 stock index was 1.8% lower to 2001 and the Nasdaq dropped 2.4% to 4594.

The path forward for stocks and other risk assets will continue to be rocky and could drag on as the political uncertainty in the U.K. and EU drags on.

"Stocks have entered a new realm of volatility, unlikely to abate anytime soon," Gina Martin Adams, equity strategist at Wells Fargo Securities told clients. "Better get used to it. Last week's British vote to leave the EU appears to have opened a door of extended uncertainty in Europe ... resulting in a near-term outlook for 'risk-off' strategies (or defensive investments like bonds and gold) to continue to perform" well.

U.S. markets got hurt by another sharp drop in banking stocks. Bank of America is down more than 6% and Citigroup dropped more than 4%.

As financial markets around the world seek stability after Friday's global selloff after the Brexit vote, or vote by Britain to exit the EU, high-level policy makers around the globe were taking steps to reassure nervous investors.

The United Kingdom's finance minister George Osborne worked to calm nerves over the country's vote to leave the European Union. U.S. Treasury secretary Jack Lew also took to the airwaves, telling CNBC that the Brexit vote is something the U.K., EU and U.S. "can manage through."

Lew stressed that markets were operating in an "orderly" fashion and downplayed fears of a brewing financial crisis.

"There is no sense of a financial crisis developing," Lew told CNBC, adding that it is up to policy makers around the globe to do what they can to create conditions to boost economic growth despite the fresh headwinds.

Brexit: U.S. firms' jobs could leave U.K.

Stocks in Europe closed down across the board. The broad Stoxx Europe 600 index, which fell 7% Friday, was down 4.1%, while the FTSE 100 benchmark in London declined about 2.6% and Germany’s DAX was 3% lower. The British pound fell more than 2% against the dollar. Since early Friday the pound has dropped to levels last seen in 1985.

Traders work on the floor of the New York Stock Exchange Friday following news that the United Kingdom has voted to leave the European Union on June 24, 2016 in New York City.

“It will not be plain sailing in the days ahead,” Osborne said in remarks in London.

It was Osborne's first public appearance since the U.K.'s vote to leave the bloc. He said he had been working closely with Bank of England Governor Mark Carney and fellow finance ministers and international organizations and that the U.K. was “equipped for whatever happens.”

U.K. finance minister tries to calm investors

Tokyo stock markets rebounded Monday after major losses last week in the wake of Britain’s shocking vote to leave the EU. The benchmark Nikkei 225 index closed Monday at 15,309.21, up 2.4%, in a day of relatively calm trading. The yen closed Monday at 101.7 to the dollar.

The yen briefly dropped below 100 during trading Friday for the first time since November 2013, before closing at about 102.2.

The Nikkei index plummeted 7.9% on Friday after the surprise “Brexit” vote, closing below 15,000 for the first time in more than four months. Brexit is a British exit from the EU.

The losses deepened concerns over the viability of “Abenomics,” which depends in part on a weak yen to boost exports and corporate profits. Prime Minister Shinzo Abe has sought to increase domestic spending to end nearly two decades of deflation and stagnant growth.

'Brexit' puts investors on high alert this week

Kazuhiro Takahashi, senior strategist at Daiwa Securities Co., told Japan’s Kyodo News service that fears over Britain’s exit from the EU receded after Abe administration and Bank of Japan officials met Monday to discuss the impact on the economy.

"While there is still unease in the market following the vote, for now, hopes that the government will take measures to seek financial stability is supporting Tokyo stocks," Takahashi said.

Seki Obata, associate professor at Keio University’s School of Business Administration, in Tokyo, and a former finance ministry official, said a stronger yen is unlikely to cause serious damage to Japan’s economy and that the overall impact of the Brexit vote is likely to be limited.

“Major Japanese companies will consider relocating their headquarters from London, but most Japanese companies move slowly and that could take a few years,” Obata said at a press briefing Monday.

Senior officials in Japan spent the weekend trying to ease public concerns.

Masatsugu Asakawa, vice minister for international affairs at Japan’s finance ministry, said on Saturday the government “will take thorough measures" to stabilize the financial markets.

Contributing: Kirk Spitzer, Kim Hjelmgaard and Nathan Bomey.

A pedestrian looks at an electric quotation board flashing the Nikkei key index of the Tokyo Stock Exchange (TSE) in front of a securities company in Tokyo on June 27, 2016.
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