‘Brexit’ Vote: U.K. Prime Minister Resigns ….. U.S. Markets Drop Sharply
LAGOS JUNE 24TH (URHOBOTODAY)-David Cameron has resigned as Prime Minister of Britain in an emotional speech outside 10 Downing Street.
His resignation followed a landmark referendum that saw the country voting to leave the European Union.
Mr. Cameron voice broke as he announced the cabinet would meet on Monday to draw up a time-table for his exit as leader of the world fifth largest economy.
A new prime minister is expected to be elected in October.
A majority of British voters (51.7 percent) followed the call of Pro-Leave campaigners who had described the vote as an independence from the European Union oppression and bureaucracy that has resulted in mass migration into the island country.
While England voted overwhelmingly for Brexit, Scotland and Northern Ireland backed the Remain camp.
With Over 72.2 percent voters’ turnout (last general election in the country has 66.1 percent turnout), many pro-Leave campaigners, led by leader of far-right UKIP party, Nigel Farage and former mayor of London Boris Johnson, are already seeing the referendum as a rejection of the leadership of Mr. Cameron, who campaigned vigorously for Britain to remain in the EU.
Despite a strong showing for the Pro-remain campaign in London and Scotland, majority of British cities voted to quit the EU.
Mr Cameron’s Tory party rival, Boris Johnson, who hasn’t hidden his desire to become PM is seen by many as a possible successor.
“I think the Boris Johnson momentum will be unstoppable,” Steven Fielding, a professor of political history at the University of Nottingham told the Washington Post.
“Cameron will try to find a dignified exit. But it’s not clear how long the backbenchers will give him to do that.”
Mr. Farage, who already admitted that the Pro-remain were going to win the referendum, recanted and claimed victory for the historic decision.
“We have got our country back,” he tweeted. “Thanks to all of you.”
Let June 23rd go down in history as our Independence Day,” he shouted with arms held high to his supporters.
Although Mr Farage is claiming this as a personal victory, many political analysts see the possibility of his anti-immigration far-right party occupying No 10 Downing Street as far-fetched.
Gisela Stuart, Vote leave campaigner and Labour MP, addressed Manchester Town Hall this morning.
She says, “We have just taken control. 33 million people went to the ballot box and made a democratic decision. They reflected on our 40 year history and by a majority they have decided to leave.
“I think that is democracy at work.”
The news of the Britain exit from the EU caused immediate backlash to the country’s economy as the sterling crashed to 9 per cent against the dollar – its lowest value since 1985.
Financial analysts also fear more debilitating consequences of the decision on the world’s fifth largest economy in the coming days.
“People will be waking up this morning to turmoil in the markets and the pound crashing, and fearing the emergency budget the Chancellor threatened to hike their taxes and cut public services, said shadow chancellor, John McDonnell.
“The Government must now take steps to stabilise the economy, and to protect jobs, pensions and wages. Labour will not allow any instability to be paid for by the working people of this country,” he added.
In another development, major U.S. stock indexes plunged Friday following a large-scale global selloff overnight in the wake of Britain’s vote to leaEuropean Union.ve the
The Dow Jones industrial index plummeted more than 500 points, or about 3%, at its open. The broader Standard & Poors 500 index and the technology heavy Nasdaq composite also opened down about 3%.
Stocks recovered somewhat afterward, with the Dow down about 2% in early trading and the other indexes also paring their losses.
The U.S. market drop followed a decline of nearly 8% in Japan and somewhat smaller but widespread losses throughout Europe as investors awoke to assess the fallout from the “Brexit” vote.
World financial officials were on high alert Friday.
The Federal Reserve said it was “carefully monitoring developments in global financial markets” and was prepared to provide dollars to other foreign central banks to increase liquidity. The Fed said pressures in global markets “could have adverse implications for the U.S. economy.”
Treasury Secretary Jacob J. Lew said he also was watching the situation and was consulting closely with British and EU officials. He and other finance ministers and central bank governors from the Group of Seven industrial nations, which include the U.S. and Britain, said Friday they were ready to take steps to stabilize markets because they “recognize that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability.”
The hit to stocks means even Americans who have not been monitoring the Brexit vote will feel a pinch in their 401(k) plans. Consumer and business confidence, which was just recovering from sluggish growth last winter due to China’s slowdown and falling oil prices, could also take a hit.
Sung Won Sohn, an economist at Cal State Channel Islands, said an expected interest rate hike this year by the Federal Reserve “is no longer on the table” due to the stronger value of the dollar triggered by the British vote and expectations that reduced demand caused by slower growth in Britain and Europe would hurt the U.S. economy.
“The U.S. central bank might have to cut the interest rate back to zero if economic and financial conditions worsen beyond expectations,” he said.
A closely watched barometer by the CME Group futures exchange said Friday that there now was no chance of a rate hike in July, after putting the odds at about 12% before the Brexit results. The odds of a slight rate cut next month increased to 7% from zero.
Where things go from here is highly uncertain, but the economic climate is rife with significant risks as a growing backlash against globalization threatens to remake the world economic order.
The latest setback comes at a vulnerable time for the U.S. economy as job growth has weakened and many are concerned about what lies ahead in a presidential election year.
Many economists predict that Britain will slide into recession as its decision to leave raises questions about its future trade and broader relationship with the EU.
By itself, a recession in Britain isn’t likely to have a big direct effect outside of Europe; the British economy is the fifth-largest but still accounts for only about 2.5% of world economic output.
Even so, it could do much greater global damage as the referendum results now set in motion what many experts expect will be a long, uncertain and politically tortuous process of Britain unhinging itself from the rules of the EU, especially the free flow of labor that has been a hallmark of the British economy.
Policymakers as well as investors are particularly worried that Britain’s move will be a catalyst for other secession movements in the EU, which could fundamentally alter the political and economic structure that has been in place for decades in the aftermath of World War II.
“With one fell swoop, the world order has been turned upside down overnight and where the chaos stops no one knows,” said Chris Rupkey, chief financial economist for Mitsubishi UFG Financial Group.
For the U.S., one of the biggest risks comes in trade. With the dollar strengthening against the pound and the euro, American manufacturers will face greater challenges in selling goods abroad.
Some U.S. business groups as well as analysts cautioned against overreacting to the situation in Britain.
Thomas J. Donohue, president of the U.S. Chamber of Commerce, said it was important for investors in U.S. businesses “to avoid precipitous action” until Britain and the EU negotiate the specific terms of the exit.
“American companies’ investments in Britain are worth more than half a trillion dollars, and many of those investments were made to reach not just British consumers but those in the European mainland as well,” he said. “We are committed to working with the U.K. government to ensure that the priorities of these stakeholders are taken into account in the debates that lie ahead.”