Global financial markets were thrown into turmoil yesterday after Britons voted to exit the European Union (EU).

The final vote went 52 per cent in favour of leaving the EU after a membership of 43 years and led to British Prime Minister David Cameron saying he would resign by October.

In what will go down in history as one of the most volatile days on foreign exchange markets, the British pound dropped by US17c - its biggest one-day fall on record - evoking memories of the Global Financial Crisis and the 1987 share market crash.

As a consequence of the vote, the New Zealand share market's benchmark S&P/NZX 50 closed down 2.3 per cent at 6667.8. Sharemarkets across Asia plunged as it became evident the votes were swinging in favour of Britain's exit. Last night investors dumped European shares as soon as the markets opened. Britain's FTSE 100 plunged about 8 percent while German index tanked 10 percent. France's index tumbled about 7 percent.


Traders at UBS were calling for London's FTSE 100 index to fall by 12 to 19 per cent overnight.

The New Zealand dollar shot up against the severely battered pound from 48.5p to 52p but dropped like a stone against the US dollar, to US70.7c from US73c as concerns about the so called "risk" currencies emerged.

World markets started with a positive tone, with Wall Street's Dow Jones Industrial Index closing 1.29 per cent higher and with the Kiwi firming, based on opinion polls suggesting Britain would remain in EU.

But the optimism proved to be short-lived as early results showed the "exit" vote pulling ahead of the "remain" vote.

Northern Hemisphere share markets are expected to take a big hit in response to the vote when they reopen for business.

"It will be a messy day for markets in the Northern Hemisphere timezone," Bernard Doyle, chief investment officer at JB Were, said.

"In terms of the big markets in the United Kingdom, Europe and the United States - I would expect to see a sell-off in the vicinity of 5 per cent or more," Doyle said.

Britain's exit would count as a global market event - not so much because of the impact of the UK leaving - but due to the questions that it would raise about the future of the EU itself as other EU members look to their own continued membership.

"In 2016 you have seen the rise of movements - or politicians - who reflect a disaffected populace - so it's wrong to discount the significance of this," Doyle said. "It raises questions and markets don't like questions. They will sell off until they know the answers," he said.

But Doyle said he did not think the markets were heading towards another Global Financial Crisis.

"I think that you will see a strong global policy response from central banks and from governments seeking to calm nerves - but it will not be a turning point in the global economic cycle," he said.

Craigs Investment Partners head of private wealth research Mark Lister said investors needed to "buckle up" and prepare for more dramatic market volatility. "A cloud of uncertainty is hanging over Europe," Lister said. "For the time being, markets will shoot first and ask questions later."

He said Britain's exit - dubbed "Brexit" by the UK media - would also put more pressure on central banks to ease monetary policy.

"That puts pressure on the Australian and New Zealand Reserve Banks to cut interest more aggressively than previously would have," Lister said.

BNZ currency strategist Jason Wong said the vote created extreme volatility in the foreign exchange market.

Wong said it had been a dramatic day for the markets. "We have had some big changes and I think there is room for more," he said.

"This is a big event for the global economy and commodities currencies - like the Kiwi and the Aussie - have tended to underperform because of the softer outlook for the world economy," Wong said.

Michael McCarthy, chief market strategist at CMC Markets, described yesterday's market turmoil as a "unicorn day". "I've been in the markets 33 years and this would be my top five [most volatile]," he said.

"I'd compare it to the 1987 sharemarket crash and the 1992 stoush between George Soros and the Bank of England. "I'd also say it's a harder day's trading than post-GFC because that fallout took almost a year to play out."

Grant Williamson, of sharebrokers Hamilton Hindin Greene, said yesterday's fall on the local share market was the kind of reaction he would have expected to the surprise outcome of the Brexit vote. "The result has come as quite a major shock to financial markets," Williamson said. "We are in some pretty unknown territory at the moment - just how markets react from here is really a bit of an unknown."