Prime Minister Justin Trudeau says Canada is in a good position to weather the global market uncertainty in the wake of the so-called Brexit vote.
Markets tumbled after the world learned that a referendum on whether the U.K. should remain part of the European Union resulted in a victory for the ‘leave’ camp.
The S&P/TSX composite index ended the day down 239.50 points at 13,891.88 while the loonie fell 1.37 U.S. cents to 76.93 cents US.
In New York, the Dow Jones industrial average plummeted 610.32 points to 17,400.75, the S&P 500 dropped 75.91 points to 2,037.41, and the Nasdaq composite lost 202.06 points to 4,707.98.
Outside of North American, Japan’s Nikkei fell 7.9%, the pan-European STOXX 600 index closed down about 7%, the French CAC closed down roughly 8%, Germany’s DAX index closed down 6.8%, and Italy’s FTSE MID and Spain’s IBEX both fell over 12% on the day.
Trudeau says he is keeping in close contact with Bank of Canada Governor Stephen Poloz but that Canada is in a good position to handle any economic fallout.
Economists expect short-term volatility and a more cautious approach by investors but an energy analyst with National Bank Financial, Greg Colman, says the vote could lead to lower demand for oil and natural gas in Britain and Europe if their economies slow but adds that demand has been declining for some time so it likely won’t have much of an impact on the global energy demand picture.
The Canadian dollar is likely to continue falling while the US dollar, generally seen as a safe haven in times of turmoil, is expected to strengthen.
RBC Economics expects the vote to have a “muted” effect on the Canadian economy with an increase in risk-aversion leading to downward pressure on oil prices, government bond yields, and the loonie.