Global stocks fell Wednesday, while the British pound hit a new 31-year low, as worries reawakened about the economic repercussions of Britain’s decision to leave the European Union.
The pound traded below the US$1.30 (CAD$1.68) level for the first time in more than three decades. It was trading at US$1.2979, down 0.3 per cent on the day.
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Last week, investors rushed to sell out of funds that own British commercial real estate, which had been inflated by foreign money in recent years. Mark Carney, the Bank of England governor, said that some of the risks to the economy predicted before the referendum had begun to crystalize.
The Bank of England has cited commercial real estate as one of the risks to the British economy. The sector had taken in capital from overseas and had become “stretched,” the bank said.
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Financial groups Aviva Investors, Standard Life and M&G Investments stopped trading Tuesday in commercial property funds following a rapid increase in investors trying to liquidate their holdings. Both said they stopped trading to protect other investors who wished to remain in their respective funds.
“The dominos are starting to fall in the U.K. commercial property market, as yet another fund locks its doors on the back of outflows precipitated by the Brexit vote,” Laith Khalaf, a senior analyst at Hargreaves Lansdown, said after the move by Aviva. “It’s probably only a matter of time before we see other funds follow suit.”
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