U.S. stock futures fell more than 3 percent in premarket trading on Friday after Britain’s vote to quit the European Union delivered the biggest shock to the global financial system since the 2008 financial crisis. S&P 500 futures and Nasdaq futures were down about 3.9 percent while those on the Dow Jones industrial average were off 3.1 percent, indicating Wall Street will open sharply lower. Investors worried about damage to the world economy sought refuge in the dollar and other safe-harbor assets such as gold and U.S. Treasury bonds. Banks were among the biggest losers. Britain’s FTSE 100 stock index slumped 4.7 percent in morning trade. Asian equity markets also tumbled. Amid the turmoil, sterling hit a 31-year low in its biggest intraday percentage fall on record and Prime Minister David Cameron said he would step down by October. “It’s going to be ugly in the morning,” said Mike Ellingsen, a trader at U.S. Global Investors Inc in San Antonio, Texas. “This is going to catch a lot of people wrong-footed, end of discussion. Obviously markets were not pricing this in.” Citigroup (C.N), Bank of America (BAC.N), JPMorgan (JPM.N) and Goldman Sachs (GS.N) slumped by between 6.6 percent and 8.5 percent. U.S. banks have large operations in London. Trading in S&P 500 and Nasdaq futures was halted briefly overnight after they fell more than 5 percent, triggering limit thresholds. U.S. short-term interest rate futures rose to contract highs amid speculation the Federal Reserve could cut interest rates to help shield the economy from any global fallout. Investors have been waiting for the Fed to raise borrowing costs as the economy improves. “In terms of economic growth ahead, we’re looking at a possible recession in Great Britain, stagnate growth in Europe and less growth in the States,” said Peter Cardillo, chief market economist at First Standard Financial in New York. “The world is going to be in for a long period of low interest rates. If it gets too rough there’s a possibility that the U.S. Fed may have to take us back down to zero interest rates,” Cardillo said. Futures on the VIX .VIX volatility index – known as Wall Street’s fear gauge – surged 41 percent to 24.27, above its long-term average of 20. The market was already expected to be volatile because traders will be adjusting portfolios to account for an annual reconstitution of the widely followed Russell stock indexes. Oil prices also slumped, dropping more than 5 percent, the biggest drop since early February. [O/R] Exxon (XOM.N) and Chevron (CVX.N) were down about 2.8 percent each. Among gold miners, Barrick Gold (ABX.N) was up 9 percent and Newmont Mining (NEM.N) was up 7.3 percent. The last time the Chicago Mercantile Exchange’s circuit breaker was triggered on index futures was in August, when a selloff in Chinese stocks pummeled shares around the world. U.S. stocks had risen in recent sessions as investors bet that Britain would remain part of the EU. As of Thursday’s close, the S&P 500 index had risen 3 percent since the start of the year. Futures snapshot at 6:41 a.m. ET (1041 GMT): * S&P 500 e-minis ESc1 were down 82 points, or 3.89 percent, with 1,497,066 contracts traded. * Nasdaq 100 e-minis NQc1 were down 173 points, or 3.88 percent, on volume of 144,364 contracts. * Dow e-minis 1YMc1 were down 556 points, or 3.1 percent, with 192,914 contracts changing hands. (Additional reporting by Richard Leong, Rodrigo Campos and Yashaswini Swamynathan; Editing by Alison Williams and Ted Kerr)
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