Fears that Britain is on the verge of voting to leave the European Union next week, spread through global financial markets today, sending Asian and European shares sharply lower and the pound to an eight-week low.
With the world economy looking shaky, and surprisingly weak, jobs figures last month suggesting even the United States is not ready for higher interest rates, concerns over the economic fallout of a Brexit have lurked in the background for weeks.
They were at the heart on Monday of the biggest falls for Asian stock markets in four months, and a one per cent drop in European share prices, after a new poll late on Friday gave the "Leave" camp a 10 point lead.
Money markets have now abandoned expectations, high just weeks ago, that the US Federal Reserve could raise official borrowing costs on Wednesday. Instead, the worry is that it could use language that quells expectations of a move this year at all.
"We're in uncharted territory in front of the Brexit vote, and then there's also the Fed this week. So the wall of worry is quite high at the moment," said Zeg Choudhry, managing director at LONTRAD. "All the banks are a little bit lower, and they're the ones which are likely to get hit. For the next two weeks, you've got to be slightly mad if you've not got your money in defensive stocks."
The news out of China, global investors' other big concern this year, was also poor, with data showing investment growth cooling. Stock markets in Tokyo, Hong Kong and Shanghai all fell by around three per cent.
By comparison, the moves in Europe, where investors have been preparing for the British vote for months, were more subdued. Britain's FTSE 100 fell one per cent, Germany's DAX 0.9 per cent, and France's CAC 40 by 0.8 per cent.
On currency markets, sterling fell another half a per cent against the Dollar after sinking by as much as 3 full cents in value on Friday. The biggest beneficiary of the global moves, however, was the Yen, traditionally investors' first choice in times of financial and economic stress.
Further gains for the Japanese currency, which broke past long-term resistance around 106.50 Yen per Dollar and is up 14 per cent this year, puts more pressure on the Bank of Japan to act against the currency's strength this week.
"While the pound is the worst-performing G10 currency versus the Dollar this year, the Yen is by far the best," said Derek Halpenny, European Head of Global Markets Research at Bank of Tokyo-Mitsubishi in London.
"The continued surge of the Yen will lift expectations that the BOJ may surprise the markets and announce some additional monetary easing."
The grim mood was visible on commodities markets, where crude oil futures added to Friday's three per cent drop after data showed the US oil drilling rig count rose for the second week in row.
Gold, another perceived safe haven, hit four-week highs above $1,280 an ounce. (Reuters)