HONG KONG AND LONDON (CNNMoney)– European stock markets came under heavy pressure and the pound hit a fresh low Monday following the U.K.’s historic vote to leave the European Union.
The pound sank 3.7% against the dollar to trade below $1.32, a fresh low and its weakest level in more than three decades.
The FTSE 250, which is made up of mostly mid-sized British companies, shed 6.2%. Benchmark indexes in London, Paris and Frankfurt all lost roughly 2%, while Ireland’s main stock market plummeted by 6.6%.
Big banks were again targeted, and shares in Barclays and RBS were briefly halted in London as they raced to losses of more than 20%. Each has fallen more than 30% since the Brexit results were announced.
“The extent of the uncertainty that now clouds the U.K.’s economic and political outlook is hard to exaggerate,” said Kit Juckes, strategist at Societe Generale. “Uncertainty is negative for the U.K. economy, for investor confidence and obviously, for the pound.”
A weak pound might help boost U.K. exports, but it can also cause prices to rise and make the country less attractive for investors. If they start pulling money out, the U.K. could have trouble funding its large current account deficit.
The reaction from Asian stock markets, many of which had suffered heavy losses in the immediate aftermath of the vote, was less clear cut.
Most major Asian markets closed the day a bit higher, after swinging throughout the day. Japan’s benchmark Nikkei gained 2.4%, clawing back some of the nearly 8% loss the index posted Friday.
British voters chose to leave the EU in a referendum on Thursday. The U.K.’s decision to become the first country to drop out of the 28-nation bloc rattled markets worldwide on Friday.
Still, the vote has far-reaching economic and political implications. Several EU leaders called on the U.K. to start the withdrawal process as soon as possible, to limit the uncertainty. But the U.K. is likely to wait before triggering the process.
Prime Minister David Cameron quickly resigned, saying it would be up to the new leader to negotiate with the EU. But it will take months for the Conservative Party to elect a new leader. Meanwhile, the main opposition Labour Party also fell into chaos after the vote.
Amid all that, the credit rating agency Moody’s said it may cut the U.K.’s rating because of the uncertainty.
The FTSE 100 in London ended Friday 3.2% lower. A broad gauge of European blue-chip stocks index sank around 6.7%.
U.S. stocks followed plunging global markets. The Dow ended the day down 611 points, or over 3.4%, while the S&P 500 lost 3.6%. The Nasdaq dropped 4.12%, and into correction territory.
One of the biggest unknowns is whether the U.K.’s vote to leave the union will trigger demands to leave from other countries, setting off a wave of turmoil.
“The question has much more to do with the potential European economic shock,” said Khiem Do, a fund manager at Barings Asset Management. “if Europe can find its footing and if the concern of [other] referendums in Europe will dissipate, I think European equity markets will bounce quite nicely.”