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But there has been significant damage already done. In early Asian trading on Monday, the Sterling Pound fell by 1.92 per cent to 1.3417 against the US dollar after regaining some ground from its worst performance in 31 years late last week. At press time, it had slid further to -2.05 per cent.
Japan’s Nikkei opened 1.60 per cent up from its drastic close on Friday, but began to slowly slide at press time.
According to some estimates, the amount of decline in markets from Australia to Wall Street last week shaved off some $2 trillion in global market worth.
In the US, the S&P 500 closed 3.59 per cent down to 2,037 while the Nasdaq ended 4.12 per cent down to 4,707.98 on Friday. The Dow Jones Industrial Average fell 3.39 per cent to close at 17,400.75.
But last week it was Japan’s Nikkei which suffered a severe blow, losing almost eight per cent of its worth immediately following the Brexit results. In parallel, the Japanese yen currency gained ground as the dollar lost more than 4 per cent to 101.72 in after hours trading on Friday.
A lower yen – which is seen as a safe bet by global investors shying away from the Sterling – spells disaster for Tokyo’s recent economic drive to pull the country out of the danger zone teetering about recession because it means Japanese exports now cost more to buy. Global importers could theoretically turn elsewhere for their wares.
The drastic drop has prompted debate among analysts whether the Bank of Japan will intervene to weaken the yen if it strengthened further. That could potentially spark a currency war with other countries which have already expressed concern about previous BOJ intervention.
The Japanese government held a meeting just ahead of markets opening and local media reported that the prime minister ordered the finance minister to take whatever steps necessary to stem the tide of a strengthening yen.
In the meantime, markets will monitor how London-Brussels talks will pan out this week.
Prime Minister David Cameron will have a chance to explain his country’s leave vote to EU heads of state at a summit dinner on Tuesday, but will not take part in the meetings to follow.
Investors are unlikely to get a clear picture any time soon because European leaders themselves are divided on how to deal with Britain’s exit vote.
Some, such as EU Parliament President Martin Schultz, want the formal exit talks to begin as soon as Cameron leaves the dinner. Or before.
Others, led by German Chancellor Angela Merkel, want to hold out for the possibility that London could reexamine its position following the vote.
According to the EU’s Article 50, it can take up to two years for a member state asking to withdraw from the Union to finalize negotiations on its exit.
But Article 50 also allows a withdrawn state to apply for readmission into the EU based on the provisions of Article 49. However, a number of European leaders have said there is no road back to the Union and have ruled out renegotiating treaties between the UK and Brussels.
While a member state cannot be forced to initiate Article 50 withdrawal negotiations, European leaders have been pressuring 10 Downing Street to move quickly on the exit.
In his resignation speech on Friday, Cameron said he would not make any decision on Article 50 – instead deferring the issue to his successor in elections in October.
The BRICS Post with inputs from Agencies