Saturday, November 28 2020


Tokyo stocks rebound after Brexit sell-off

Update: June, 27/2016 - 11:50

TOKYO - Tokyo stocks rebounded today from a route that wiped more than US$2 trillion off global financial markets in response to Britain’s shock vote to quit the European Union.

But analysts warned that the pain may not be over on financial markets as the referendum result leaves a trail of unanswered questions about the impact of the decision to leave the 28-member bloc.

London has yet to clearly outline its next steps, while European leader embarked on a flurry of diplomacy to plan the way forward.

Some are pushing for a quickie divorce amid fears Britain’s vote to leave will create a domino effect in eurosceptic member states.

British Prime Minister David Cameron has said he will resign by October and leave the negotiations to his successor.

"It’s hard to say that the market has fully digested (the vote) since there is still uncertainty over who will be in charge of talks over the EU exit," said Toshihiko Matsuno, strategist at SMBC Friend Securities.

"The situation won’t be clear until October" when Britain gets a new leader.

"The market right now is sensitive to negative news so we could see more volatility," he added.

In early trading, Tokyo’s benchmark Nikkei 225 index was up 1.34 per cent, or 201.06 points, at 15,153.08, after diving nearly eight per cent on Friday in its biggest one-day plunge since Japan’s 2011 quake-tsunami disaster.

The broader Topix index of all first-section shares rose 1.01 per cent, or 12.22 points, to 1,216.70 at the start.

Japanese Prime Minister Shinzo Abe held an emergency meeting with top officials this morning to discuss Brexit and how to deal with the market fallout.

Ahead of the meeting, Abe pointed to unspecified measures to smooth out any impact on the world’s number three economy.

We will make thorough efforts so that (Brexit) will not negatively affect Japan’s economy and the business of small to medium-sized firms," he said, without elaborating.

Japan’s currency surged Friday as traders scooped up the safe-haven unit, seen as a safe bet in times of turmoil.

The rally in the yen, which had already been on the upswing before the vote, is bad for Japanese shares as it poses a threat to profits at major exporters.

And Britain’s vote to leave the EU could have significant consequences for more than 1,000 Japanese firms that operate in Britain -- many of which see it as a staging point for dealing in Europe.

"People are finding it difficult to comprehend what Brexit implies for the future -- we don’t know yet what the magnitude of the shock will be," Steven Barrow, head of Group-of-10 strategy at Standard Bank Group in London, told Bloomberg News.

On forex markets, the pound sat around three-decade lows at $1.3388, off $1.3670 in New York but still above $1.3229, its lowest point earlier on Friday.

The dollar was flat at 102.20 yen today, from 102.21 yen in US trade. — AFP

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