British pound, euro slip as Brexit worries marks start of week

Sterling fell more than two per cent, the euro took a hammering and stocks dropped again on Monday as Britain's vote to leave the European Union drove investors to seek safety in the yen, gold and low-risk government debt.

Oil prices held near Friday's lows but were up on the day as traders took the view the British referendum's result would have little effect on global demand.

Sentiment remained weak even though the worst of the turmoil seen on Friday, when global stock markets suffered their biggest decline in nearly five years, had eased.

• 5 ways Brexit could hit Canadian pocketbooks
• Britain, EU at odds over timing of 'divorce' talks
• ANALYSIS l No clear end to financial uncertainty after Brexit vote

The pound recovered some of its lost ground after British finance minister George Osborne said the government had robust contingency plans in place and that it and the Bank of England could do more if needed.

The currency last traded at $1.3455, down 1.8 per cent on the low. It had fallen as far as $1.3356 in Asian trade and to $1.3228 on Friday, its lowest in 31 years.

It also fell 1.2 per cent to 82.28 pence against the euro and 1.7 per cent to 137.10 yen.

The euro, also considered vulnerable to the exit from the EU of its second-largest economy and a major financial centre, fell 0.6 per cent to $1.1057, off a low of $1.0980.

Britain's FTSE 100 share index, which lost 3.2 per cent on Friday, ebbed a further 0.8 per cent on Monday.

The pan-European FTSEurofirst 300 stocks index, which fell 7 per cent on Friday in its biggest plunge in nearly eight years, was down 1.1 per cent on Monday.

Germany's DAX pulled back only 0.5 per cent and Spain's IBEX index rose 1.8 per cent after acting Prime Minister Mariano Rajoy's People's Party fared better than expected in weekend elections.

• Complete CBC.ca coverage of Brexit
• Brexit vote plunges U.K. Labour Party into turmoil

Wall Street, where the S&P 500 suffered its worst decline in 10 months on Friday, looked set for a modestly lower open, according to e-mini index futures.

MSCI's broadest index of Asia-Pacific shares outside Japan edged down 0.1 per cent. Companies with UK exposure in particular came under pressure.

"Things are so uncertain that investors still do not have a clear idea how much of their risk assets they need to sell," said Hiroko Iwaki, senior foreign bond strategist at Mizuho Securities. "But it is fair to assume investors are not yet done with all the selling they need to."

Yen stays strong

Financial shares led declines in Australia and Hong Kong. The financial sector is one of those most threatened by Brexit if the City of London's investment products and services lose the prized "EU passports" that give them access to the single market.

However, Japan's Nikkei 225 closed 2.4 per cent higher after government officials stepped up warnings that they could intervene in currency market to stabilize the yen, whose strength harms exporters.

• British pound hits 31-year low amid Brexit results

The Japanese currency, considered a safe investment in turbulent times, strengthened 0.1 per cent to 102.11 per dollar. It had risen as far as 101.50 in Asian trade.

Yields on core government debt, another perceived safe haven, fell again. German 10-year bond yields, the benchmark for euro zone borrowing costs, fell 2.4 basis points to minus 0.08 per cent, holding above Friday's record low of almost minus 0.17 per cent.

Spanish 10-year bonds outperformed those of other lower-rated southern euro zone countries under threat from Brexit-induced turmoil. Their yields fell more than 9 bps to 1.54 per cent after Sunday's election.

U.S. Treasury yields also fell. The 10-year note yielded 1.51 per cent, 7 bps lower than Friday's close but well above that day's low of 1.41 per cent.

Gold, which saw its biggest rise since 2009 on Friday, climbed again. It last traded at $1,326 an ounce, up 0.8 per cent on the day.