Welcome to FN’s rolling update of reaction to the historic vote. Please refresh this page for updates.
With the pound falling by more than 11% investors who had bet on a vote to remain are looking at big losses. The City stumbles into the morning with a profound sense of uncertainty.
Jamie Dimon, Lloyd Blankfein, Jes Staley, Richard Buxton, and Crispin Odey are among the first to react to the historic decision
14:59: Barney Reynolds, global co-head of financial institutions, Shearman & Sterling
“I think people should have contingency plans but it’d be crazy to start acting on them now. It’s difficult to move things and if you move too soon you could end up in a real pickle. You could find you’ve set up in a place that isn’t receptive to your business as things change.
“I think it would be a premature decision [to relocate staff before we Brexit]. Other countries may want to get out of Europe as well, including Italy and The Netherlands. I’d advise those considering a move to wait a little bit longer and see what Leave negotiates.
“I don’t think it would take years – because the UK’s beef with the EU is quite specific… We are a major world economy. It’s ridiculous we should be so timid – they need relations with us too.
“There are two passports under Mifid 2 that cover much of cross-border financial services activity in the City.”
14:04 Morgan Stanley spokesman in London denies a BBC report saying it has started the process of moving about 2,000 London-based investment banking staff to Dublin or Frankfurt.
The bank had said in a statement earlier on June 24: “There will be at least a period of two years before an actual exit takes place, so there will be time to implement any changes required to adjust our business to the new environment. Morgan Stanley will continue to monitor developments very closely and will adapt accordingly while prioritising the interests of our clients, our shareholders and our employees.”
13:41: Juergen Blumberg, head of capital markets at Source ETFs
“Gold has been the asset class of the day. In the first three trading hours some Gold exchange-traded commodities experienced ten times their long term average trading volume. Source has already seen institutional investors buying $ 150 million in our Source Physical Gold ETC leading to an assets under management increase of more than 5% on top of the 6% positive market move.”
13:15: APG Asset Management, which manages €359 billion for ABP – Europe’s largest pension fund
“Pension funds as long term investors benefit from a stable economy. The result of this referendum however has increased uncertainty and instability, just when the European economy was showing signs of improvement. That is a development that unfortunately not only in the short term, but also in the long term could prove to be negative for pension funds.”
12:20: Manny Roman, CEO of Man Group
“The news overnight has come as a surprise to the markets and will inevitably lead to a period of uncertainty and transition, as the terms of Britain’s exit and its future relationship with the European Union are determined. Nonetheless, our industry is in the business of analysing and responding to global political and economic developments. It will take time to work out the consequences of the result, but we are committed to the UK as part of our global business and to hiring the best talent from all over the world. In the meantime, we continue to focus on performance and serving our clients through this time of change.”
11:50: Rob Boardman, European chief executive, ITG
“The market had a very clumsy open which made trading very difficult. During the first hour we saw a lot of institutions not wanting to trade, to see where prices stabilised.
“Systems capacity-wise we are fine, but some broker systems will not cope. We are in unchartered territory, we are on for about a three-times normal volume day.”
“The talk in our office is that it looks like an inspired move to base our European headquarters in Dublin. It’s too early to say how we structure ourselves or what the UK’s relationship with the EU is, but we were vehemently opposed to elements of Mifid II, such as the dark pools caps, and this could be a chance for the UK to put some of those clauses on pause.”
11:30: Internal memo sent by Icap chief executive Michael Spencer
“Whilst the outcome of this referendum is a surprise to many people in the UK and outside, I do not believe the impact on ICAP is worrisome. We are a truly global company servicing global clients; international trade and finance will continue. London’s position as the major financial centre in Europe is not going to be overturned; the UK as the world’s fifth largest economy is not about to become internationally isolated. Our transaction with Tullett Prebon [Icap’s voice broking merger with Tullett Prebon] is entirely unaffected.”
10:56: David Page, senior economist, Axa Investment Managers
We continue to believe that the Bank of England will provide support for the UK economy. Governor Carney spoke this morning to reassure financial markets. He stated that the Bank stood ready to provide liquidity support in sterling and FX, if necessary. He reiterated that the commercial banking system was significantly more resilient and better capitalised than in the past. And he said the Bank would ‘assess economic conditions and consider other policy responses’. We have long forecast that Brexit would consider an easing in monetary policy, we estimate two successive 0.25% rate cuts and the likelihood of £50-100bn quantitative easing (QE).
10:25: Property agents LCP
“It is now likely that property prices in Prime Central London will increase. Whilst LCP had originally predicted that this would not occur until 2017, the signs are that the re-entry of investors into the market will be more rapid than originally expected. LCP have received a stream of enquiries from the early hours of this morning.”
10:11: BlackRock strategy team statement
“David Cameron has announced he will resign as UK prime minister by October, setting the stage for a Conservative leadership election this summer. This race will likely be dominated by Leave supporters, increasing uncertainty and the risk of emotive exit negotiations. We see a Scottish independence vote as back on the table.
“We expect the UK divorce to be messy, drawn out and costly. It involves unpacking UK and EU laws, and striking trade deals with a spurned EU and the rest of the world. We expect potential losses in services exports and investment flows to overwhelm any benefits of lower payments to EU.”
09: 54: Mark Hemsley, chief executive, Bats Europe
“From our point of view, whilst we would have preferred to stay in the EU, it is something we can cope with. We will speak to our customers and put in a place an action plan. We won’t move our operational hub out of London but we may need legal and regulatory entities in the EU actually access customers in there, depending of course on what exactly the UK negotiates with the EU.”
09:35: Edmund Truell, chairman, Disruptive Capital Finance
“Amazing. What a phenomenal result. I am so pleased that our Leave team, which often felt so embattled and derided, stuck to our guns and prevailed against the massed ranks of vested interests.
“The City, more than any other UK sector, has suffered decades of attacks from an EU anxious to bring London down and promote the interests of Frankfurt and Paris. It will be freed from the stranglehold of directives, blizzards of rules, and costly regulations that made it less competitive against the real financial centers of New York, Singapore, Hong Kong and Tokyo. We already have to register in multiple EU jurisdictions to trade – so much for the single market – so that makes no difference. The existential threats of FTT, Solvency II, Euro bailouts…. Are all left behind. The transient fall in the pound will usher in a new era of strong economic growth in a free world.”
09:15: Deborah Cooper, partner at Mercer
“There will be continued market volatility impacting on the health of the UK’s defined benefit (DB) schemes as UK, European and global markets weigh up the likely implications. Increased volatility in gilt yields and sterling may have further impact on pension schemes.”
09:15: Brian Henderson, defined contribution and financial wellness partner at Mercer
“Many [DC members] could now see their financial health and their pensions suffer some short-term volatility. Those planning for the future may have to scale back on their aspirations; long-term savers may be able to navigate the choppy waters, but those with more immediate needs may find themselves taking in water. Anyone seeking security, whether it’s coping with debt repayment or perhaps seeking an income for life may find themselves particularity vulnerable.”
09:10: BREAKING: Statement from Mark Carney, Governor of the Bank of England
“As a backstop, and to support the functioning of markets, the Bank of England stands ready to provide more than £250bn of additional funds through its normal facilities.
“The Bank of England is also able to provide substantial liquidity in foreign currency, if required.
“We expect institutions to draw on this funding if and when appropriate, just as we expect them to draw on their own resources as needed in order to provide credit, to support markets and to supply other financial services to the real economy.
“In the coming weeks, the Bank will assess economic conditions and will consider any additional policy responses.”
09:00: Statement from the Financial Conduct Authority
“Much financial regulation currently applicable in the UK derives from EU legislation. This regulation will remain applicable until any changes are made, which will be a matter for Government and Parliament… The longer term impacts of the decision to leave the EU on the overall regulatory framework for the UK will depend, in part, on the relationship that the UK seeks with the EU in the future. We will work closely with the Government as it confirms the arrangements for the UK’s future relationship with the EU.”
08:56: Owen Lysak, senior associate, asset management specialist, Clifford Chance
“The industry faces a period of uncertainty while we wait to see how the UK/EU relationship will look. What is certain, however, is that Brexit will have a significant impact on asset managers, be they based in the UK, the EU or elsewhere. The critical issues will include the likely loss of passporting rights, which could force changes to the business model for some funds, from changes to marketing approaches to re-domiciling the fund itself. Lower levels of investor appetite for investing into non-EU structures would also become relevant for UK managed and UK located fund structures.”
08:54: Joachim Faber, Chairman of the Supervisory Board of Deutsche Börse and Chairman of the Referendum Committee looking at the merger with the LSE
“The decision of the UK to leave the EU makes it ever more important to maintain and foster ties between the UK and Europe. We are convinced that the importance of the proposed combination of Deutsche Börse and LSEG has increased even further for our customers and will provide benefits for them as well as our shareholders and other stakeholders.”
08.15: Alan Rubenstein, CEO, Pension Protection Fund
“The outcome of the referendum will clearly have significant consequences and we will be following developments carefully. However our long standing low risk approach and hedging strategy mean that we are able to cope with the volatile markets we expect to see. Our members can therefore be reassured that we will continue to protect them.”
08:10 Memo to staff from JP Morgan’s Jamie Dimon, Daniel Pinto and Mary Erdoes
“For the moment, we will continue to serve our clients as usual, and our operating model in the U.K. remains the same.
“In the months ahead, however, we may need to make changes to our European legal entity structure and the location of some roles. While these changes are not certain, we have to be prepared to comply with new laws as we serve our clients around the world. “
08:08: Martin Gilbert, chief executive of Aberdeen Asset Management
“Whilst some of the market falls are steep, from my long experience having worked through Black Monday, Black Wednesday, the Asian crisis, etc this is not the time for knee jerk reactions but rather it’s important to have a calm head on behalf of our clients. Often the best course of action is to do nothing or even as long-term investors take advantage of mis-pricing opportunities.”
07:51: Chris Cummings, Chief Executive, TheCityUK
“Clear agreement is now needed on the way forward for the forthcoming negotiations as Government shapes a new relationship for the UK with the EU and retains the jobs and investment that the UK has seen to date. For financial and related professional services, the focus is on securing continuing access to the Single Market.”
07:35: Jes Staley, Barclays CEO
“The strategy we announced on 1 March was not conditional on the UK remaining in the EU. We are a transatlantic consumer, corporate and investment bank, anchored in the UK and the US. That remains the core of our strength and the Barclays of the future.”
0734: Lloyd Blankfein, Chairman and CEO of Goldman Sachs
“We respect the decision of the British electorate and have been focused on planning for either referendum outcome for many months. Goldman Sachs has a long history of adapting to change, and we will work with relevant authorities as the terms of the exit become clear. Our primary focus, as always, remains serving our clients’ needs.”
07:30: Barrons reports that July federal-funds futures contracts are projecting an 11% probability of a US rate cut
The post says a cut would be “a shocking possibility but, in the spirit of the moment, not bloody likely. Still, it shows the narrative has changed fundamentally with any notion of rate hikes from Yellen & Co. totally out of the question any time soon.”
07:15: Richard Buxton, head of UK equities and CEO, Old Mutual Global Investors
“The biggest sadness of today is that it is reasonable to assume that the UK will quickly enter a period of economic recession, the key reason why we believed the outcome would be different from what has materialised today…
“We believe that the prospects for domestically focused UK businesses are clearly the bleakest of all. FTSE multinationals will, on a relative basis, almost certainly perform better than their domestically oriented peers as the weaker pound will support overseas earnings when translated back into sterling.”
“Nevertheless, investors should now brace themselves for an unpleasant period of relatively indiscriminate selling as funds aim to meet redemptions in conditions where liquidity may be more limited than usual.”
06:57: Bank of England press statement
“The Bank of England is monitoring developments closely. It has undertaken extensive contingency planning and is working closely with HM Treasury, other domestic authorities and overseas central banks. The Bank of England will take all necessary steps to to meet its responsibilities for monetary and financial stability.
06:13: Crispin Odey, Odey Asset Management:
“Ordinary people have spoken and broken ranks with the experts and their political leaders. This reflects proper disaffection in a world of low growth and almost no productivity growth, which can only get worse if unanswered.
“People want honest appraisals, they need structures that humanise them, leaders that they know and can communicate with, solutions that, however unpalatable, are explained, communicated and preferably debated well in advance.”
06:09: Saker Nusseibeh, chief executive, Hermes Investment Managers
“… we are watching market moves very carefully to assess the degree of contagion, if any, to global markets. Besides a sharp sell-off in risk and in sterling, as well as a recession in the UK (which is expected) our fear is that this may trigger political uncertainty within Europe which in turn may lead to a severe global market correction.
“In any case, we know that we are now in an even more prolonged super low interest rate environment outside of the UK, with the US likely to delay its decision to raise interest rates even further out.”
06:01: Piers Hillier, chief investment officer, Royal London Asset Management
“On the back of this morning’s result we expect the UK will fall into a recession. Unfortunately I see unstable market conditions lasting for between three and five years whilst new trade agreements are drawn up.
“It is our view that the UK Government will be left with no choice but to stimulate the economy through fiscal and monetary means, flooding the system with liquidity if necessary.”
From WSJ City: Brian Jacobsen, chief portfolio strategist, Wells Fargo Funds Management
“We are witnessing the formation of EU 3.0. The first version started in the early 1990s out of the European Economic Community. Version 2.0 started in 1999 with the launch of the euro. Version 3.0 seems like a return to a version where there is the mostly free flow of goods and services, but not people. The Brexit vote will likely help Podemos in Spain, the Far Right in France, the Five Star Movement in Italy, and other movements to rewrite the relationships amongst European countries.”
05:17: Hendrik du Toit, chief executive, Investec Asset Management
“The British people have spoken: their desire for sovereignty has trumped their concerns over short-term economic volatility. This is the beginning of a seismic shift in Europe and indeed around the globe. We need to respect the will of the people, that is the essence of democracy. What is now important, is that the UK leadership needs to move quickly from election mode to long-term planning. This is an opportunity to buy risk assets as markets will eventually stabilise. The long-term implications of this result well be determined by the quality of leadership and policy making over the next few years and not the noise of today. That is what we will focus on, on behalf of our clients. Now is a time for calm long-term thinking and not to be confused by the “fog of war.”
05:05: Toby Nangle, head of multi asset allocation, Emea, Columbia Threadneedle
“At open we anticipate that fixed income markets will jump to price a UK recession and a Bank of England rate cut, although the scale of currency weakness means that inflation pass-through will be carefully watched as the MPC have indicated that they will not cut and may indeed hike if inflation expectations become unanchored.”
More to follow…