Stock markets in Asia and Europe crashed Friday while bank analysts predicted that Britain and the eurozone would fall into recession as a result of the uncertainty triggered by Britain's plans to leave the European Union.
The main index on the London Stock Exchange, the FTSE 100, was down by more than 7 per cent, to 5,880 points, as of 9:15 am (0715 GMT), 15 minutes into the trading day.
Germany's Deutsche Boerse in Frankfurt, the biggest financial centre in the eurozone, saw its DAX index fall by 9.98 per cent as markets opened.
However, amid the turmoil, Deutsche Boerse and the London Stock Exchange issued a joint statement saying Britain's referendum would have no impact on their merger plans. "There will be no change to the planned conditions," they said.
In Milan and Madrid, headline stock market indexes started the day down by 8.45 per cent and 15.9 per cent respectively. In Paris, the main CAC 40 index was down by almost 10 per cent in early morning negotiations.
The British pound was trading at 1.24 against the euro, down by more than 5 per cent, and at 1.38 against the dollar, a fall of more than 7 per cent, after tumbling earlier to the 1.33-dollar mark, the lowest since 1985.
Earlier, Asian markets plummeted.
In Japan, the benchmark Nikkei 225 Stock Average closed down 7.92 per cent after falling as much as 8.46 per cent earlier. The broader Topix index was down 7.26 per cent.
China’s benchmark Shanghai Composite Index closed down 1.3 per cent.
Australia’s benchmark S&P/ASX200 finished the day down 3.28 per cent.
Economists said Britain's exit from the European Union - the so-called Brexit scenario voters backed in a Thursday referendum - was spooking markets because of the uncertainty connected to its implementation.
"The Brexit raises many possible scenarios and investors don't like uncertainty. There's quite a few unknowns: what will the UK Parliament think of this, will they try and reverse it in some way," said Patersons Securities economist Tony Farnham.
Daniel Vernazza, Lead UK Economist for Italy's UniCredit bank, said it was unclear whether Britain would continue to have unrestricted access to the EU's single market while it negotiates its exit from the bloc.
"[Britain] could unilaterally move to limit immigration from the EU and ignore rulings from the European Court of Justice before a withdrawal agreement is made, but in response the EU would surely suspend [Britain]'s access to the lucrative European single market," he wrote.
Denmark's Danske Bank said it expected Britain "to fall into recession" in the second half of the year, and the eurozone economy to follow suit, as a result of "falling investments due to higher uncertainty."
The Bank of England tried to reassure markets, announcing in a statement that it was "monitoring developments closely," coordinating with other central banks and standing ready to "take all necessary steps to meet its responsibilities for monetary and financial stability."
According to Danske Bank, the Bank of England was likely to cut interest rates from 0.5 per cent to zero and expand its quantitative easing stimulus policy by 150-200 billion pounds to prop up the British economy.
The global turmoil linked to the Brexit was also probable to lead the US central bank, the Federal Reserve, to hold off on interest rate hikes for the rest of the year, Dutch bank ING's Chief Economist Rob Carnell wrote in a note.
Nick Kounis, Head of Macro and Financial Markets Research at ABN AMRO, another Dutch bank, said Brexit in itself "is not big enough to destabilize global growth and markets," but could if it inspired other EU members to leave, "raising the risk of EU/euro fragmentation."
The Institute of International Finance (IIF), a global representative of the financial industry, urged policymakers to act decisively to redefine British-EU relations.
"The full extent of the financial market and economic impact from Brexit will not be clear for some time, but it is sure to be very disruptive in the short term and a drag on economic growth and employment in the longer term–especially for [Britain,]" IIF President and CEO Tim Adams said.