Brexit Vote Triggers Prime Minister Cameron’s Resignation, Market Selloff

British PM David Cameron on Brexit

The decision of the British people for Britain to exit (Brexit) the European Union (EU) triggered the resignation of Prime Minister David Cameron and a global market selloff on Friday.

Cameron announced his resignation during a speech in front of the media outside his office at Downing Street in London.  According to him, the “British people voted to leave the European Union and their will must be respected. The will of the British people is an instruction that must be delivered.”

The Prime Minister supported and led the “Stay” campaign as he believes that the United Kingdom is safer, stronger and better off inside the EU. The result of the referendum was close— 52% (Leave) and 48% (Stay). The advocates for a Brexit from EU won.

Britain needs a new leadership

“The British people have made the very clear decision to take a different path and as such I think the country requires fresh leadership to take it in this direction. I do not think it would be right for me to be the captain that steers our country to its next destination.”

He added that the British government must now prepare the negotiation regarding withdrawal from its membership from the EU to ensure that the interest of the country is protected and advanced.

He did not provide specifics regarding the timing of his departure, but indicated his target to have a new Prime Minister by the start of the Conservative Party conference in October.

Furthermore, Cameron reassured investors and the markets that “Britain’s economy is fundamentally strong” and he also emphasized the importance of delivering stability. According to him, Britain is a special country with so many advantages.

Impact of Brexit to the global markets

Investors around the globe are concerned about the potential impact of a Brexit from EU. Earlier this week, U.S. Federal Reserve Chairperson Janet Yellen warned that it “would negatively affect financial conditions and the U.S. economy.”

Today, the global stock markets suffered huge losses—a sign that investor are greatly concerned about Brexit. The Dow Jones Industrial Average (DJIA) declined 3.39% to 17,400.89points and the S&P 500 dropped 3.60% to 2,037.34 points. The NASDAQ fell 4.12% to 4,707.98 points and the Russell 2000 went down 3.72% to 1,128.59 points.

London’s FTSE 250 index fell 7.19% to 16,088.05 points and FTSE 100 down 3.15% to 6,138.69 points. Germany’s DAX index declined 6.82% to 9,557.16 points and France’s CAC 40 index plunged 6.24% to 4,106.73 points.

Japan’s Nikkei 225 slid 7.92% to 14,952 points and Hong Kong’s Hang Send Index dropped 2.95% to 20,253.51 points. The Shanghai Composite tanked 1.3% to 2,854.29 points.

Dean Maki, chief economist at Point72 Asset Management told Bloomberg, “Market participants are right to be concerned. This is a legitimate risk-off event, and there are concerns about what’s going to happen. We’re likely to see weaker growth as a result of this, and it’s appropriate that markets are reacting to this.”

U.S. Federal Reserve ready to provide dollar liquidity

The Federal Reserve issued a statement indicating that it is “carefully monitoring the developments in global financial markets, in cooperation with other central banks” after the UK referendum on its membership in the EU.”

The Federal Reserve also stated that it is” prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy.”

EU leadership demands Article 50 negotiations as soon as possible

Meanwhile, the EU leadership also released a joint statement indicating that Britain should start the Article 50 negotiations regarding its exit from its membership “as soon as possible however painful that process may be.”

“Any delay would unnecessarily prolong uncertainty. We have rules to deal with this in an orderly way. We stand ready to launch negotiations swiftly with the United Kingdom regarding the terms and conditions of its withdrawal from the European Union. Until this process of negotiations is over, the United Kingdom remains a member of the European Union, with all the rights and obligations that derive from this,”  according to the EU leadership.

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