Tokyo Stocks Down 3 Percent, Other Asian Stocks Slump

SEOUL, South Korea (AP) -
Pedestrians look at an electronic stock board showing Japan's Nikkei 225 index at a securities firm in Tokyo Tuesday, June 14, 2016. Asian stock markets mostly lower Tuesday tracking Wall Street's decline, as jittery investors awaited the U.S. Federal Reserve's decision on interest rates and Britain's vote on European Union membership. (AP Photo/Eugene Hoshiko)
Pedestrians look at an electronic stock board showing Japan’s Nikkei 225 index at a securities firm in Tokyo. (AP Photo/Eugene Hoshiko)

Asian stock markets slumped on Wednesday led by a 3-percent fall in Tokyo stocks, while the British pound hit a new 31-year low. In light of  gloomy comments made by the Bank of England’s governor, investors worried about the effect Britain’s decision to leave the European Union will have on the U.K. real estate market.

Tokyo’s Nikkei 225 fell 2.8 percent to 15,239.23 and South Korea’s Kospi lost 2.1 percent to 1,947.49. Hong Kong’s Hang Seng index slid 2 percent to 20,331.33. Australia’s S&P/ASX 200 was down 1.3 percent to 5,157.90. Stocks in mainland China, Taiwan and Thailand were also lower.

Concerns that the U.K.’s decision to leave the European Union might cause a steep slide in British commercial real estate value and hurt the wider economy, pushed the British pound sharply lower overnight. Mark Carney, Governor of the Bank of England, said that some of the risks to the economy predicted before the referendum had begun to crystalize, including the concern about the skyscrapers, shopping centers and other commercial real estate that have taken in capital from overseas and had become “stretched.” Although the Bank of England moved to reassure markets it would avoid a repeat of the 2007-08 financial crisis, freeing up more money for loans to business and households, it could not stop investors from selling the pound.

“BOE governor Mark Carney, almost the only British leader who seems to not be resigning at the moment, emphasized the challenges the U.K. economy will suffer in the post-Brexit world,” said Angus Nicholson, a market analyst at IG in Melbourne, Australia. “Carney’s speech seems to have initiated the dawning of realization of the longer-term impact of Brexit for many in the markets.”

The pound traded below $1.3 for the first time in over three decades. It was trading at $1.2891, down 0.6 percent from the previous close of $1.2962. The dollar weakened to 100.92 yen from 101.28 yen while the euro fell to $1.104 from $1.107.

U.S. stocks closed lower on Tuesday, a day after the Independence Day holiday. The Dow Jones industrial average fell 108.75 points, or 0.6 percent, to 17,840.62. The Standard & Poor’s 500 index slid 14.40 points, or 0.7 percent, to 2,088.55. The Nasdaq composite lost 39.67 points, or 0.8 percent, to 4,822.90.

Benchmark U.S. crude lost 29 cents at $46.31 per barrel in New York. The contract sank $2.39, or 4.9 percent, to close at $46.60 a barrel on Tuesday. Brent crude, used to price international oils, fell 29 cents to $47.67 a barrel in London.