Brexit Blowback Hits Italian and Spanish Banks

Worst Day for Italian & Spanish stocks. Banks massacred. The prophets of Project Fear reaped what they’d sown, as financial carnage spread across global markets on news that a slim majority of British voters had done the unthinkable by drowning out the relentless doomsaying and voting to leave the European Union.
The pound sterling plunged 8% against the dollar, to $1.37, its lowest level in three decades. The euro fell 1.93%, in itself a huge one-day move for a major currency. UK stocks surrendered over 3% of their value. But that was nothing compared to the havoc unleashed in other European stock markets.
Germany’s DAX plummeted 7%; France’s CAC 40 over 8%. But even that pales compared to what happened in Spain and Italy: the IBEX 35 plummeted 12.3% and the FTSE MIB 12.5%. It was their worst day on record.
The UK economy may be in for a hellishly bumpy ride in the months and years ahead, but the fact that London’s FTSE 100 was Europe’s least worstperforming stock market on this day of all days suggests that Europe’s biggest financial risks probably lie elsewhere. And that is in euro land, in particular on its southern flank.

This post was published at Wolf Street on June 25, 2016.