Brexit slide continues on world markets

Trader Jeffrey Lucchesi works on the floor of the New York Stock Exchange. File photo / AP

World shares sank further overnight, along with the British pound, as investors repositioned themselves amid deepening uncertainty related to the UK's choice to leave the European Union

Europe's bank stocks plummeted another day, and relief might not be in sight. Shares of Barclays plunged 17 per cent, while those of Royal Bank of Scotland sank 15 per cent.

"Banking stocks will continue to struggle," Michael Hewson, a market analyst at CMC Markets in London, told Bloomberg. "There is still a wider concern about the stability of the European banking sector. The [European Central Bank] will reiterate it remains prepared to act given any circumstances, as will central banks around the world."

Jefferies said Brexit "changes everything" about how investors should view Barclays, and downgraded its 2016 earnings estimate for the bank by 76 percent, according to the Wall Street Journal.

Meanwhile Standard & Poor's downgraded the UK's credit rating, cutting its AAA-rating by two notches to AA. It was the first time it slashed a AAA-rated sovereign credit rating by two notches at once.

S&P left the country on a negative outlook because of the risk to "economic prospects, fiscal and external performance, and the role of sterling as a reserve currency, as well as risks to the constitutional and economic integrity of the U.K. if there is another referendum on Scottish independence," according to Bloomberg.

Europe's Stoxx 600 Index finished the day with a plunge of 4.1 per cent from the previous close. The UK's FTSE 100 index retreated 2.6 per cent, Germany's DAX index sank 3 percent, while France's CAC 40 index also slumped 3 per cent.

Wall Street also slid. In 2.39pm New York trading, the Dow Jones Industrial Average declined 1.6 per cent, while the Nasdaq Composite Index dropped 2 per cent. In 2.24pm trading, the Standard & Poor's 500 Index shed 2.4 per cent.

Slides in shares of American Express and those of DuPont, recently down 4.1 per cent and 3.8 per cent respectively, led the drop in the Dow.

Some offered a silver lining.

"The momentum has continued downward because there continues to be a lot of uncertainty," Eric Kuby, chief investment officer at North Star Investment Management in Chicago, told Reuters. "It's important to note that it's orderly. It doesn't feel panic-inspired."

Financial stocks on Wall Street suffered too. Shares of Bank of America were down 6.4 per cent in late afternoon trading in New York, wile those of JPMorgan traded 3.6 per cent weaker.

"This is the new normal-politics could add more volatility to all financial assets," Barbara Reinhard, head of asset allocation for multi-asset strategies at Voya Investment Management, told Bloomberg. "This is in part because central banks have done the lion's share of lifting for stimulus."

Meanwhile, US Federal Reserve Chair Janet Yellen withdrew from a Wednesday panel discussion that is part of a three-day gathering by the European Central bank in Portugal, the Fed said Monday, without offering a reason, Bloomberg reported.