Sharp drop after results in north-east England reverse earlier gains on currency markets in which pound reached high of $1.50
The value of sterling slumped on currency markets as panicking investors contemplated the prospect of a vote to leave the European Union.
Results from across the country putting the Brexit camp in the lead reversed initial gains to leave the pound down nearly 8% at $1.37, compared with $1.50 just after polling stations closed.
The pounds fall, which stunned investors, was its biggest ever one-day fall, and ranked with the reaction to the collapse of Lehman Brothers in 2008 and Britains exit in 1992 from the European exchange rate mechanism on Black Wednesday.
The Tokyo stock exchange joined the rout overnight after opening up slightly from its previous day. Traders in Japan knocked 2% off the value of shares in Tokyo. In Hong Kong, shares in Britains biggest bank, HSBC, fell more than 5%.
The futures market for the FTSE 100 index in London pointed to a decline of 7.7% a significant reversal that would wipe more than 100bn off shares when trading opens on Friday morning after results from the referendum shocked investors.
Earliermomentum for sterling, attributed to investors seizing on a YouGov poll that indicated a narrow victory for remain was halted as soon as results came in.
Market watchers said the mood changed after a string of results from the north-east, Midlands and Wales pointed to a close result and possible Brexit win.
Jeremy Cook, chief economist at currency broker WorldFirst, watched sterling plummet throughout the early hours of Friday. He said: Sterling is in freefall at the moment. It looks like its goose is cooked. At one point, Cook shouted across the trading room: Its fallen into the 30s,, as the likelihood of a leave vote increased and the pound fell below $1.40.
Kathleen Brooks, research director at spread betting firm City Index, said the City had been stunned. The early exit polls and the betting odds, which had put the odds of a win for the remain camp at more than 75% on Thursday, are looking pretty detached from reality.
Sitting in the dealing room of the currency firm, Cook watched sterling slide after the Newcastle and Sunderland votes came in. He warned there could be a fall of biblical proportions if the vote is for Brexit.
Speaking as more results came in, Cook said the pound was suffering swings in volatility that exceeded the financial crisis.
The usual caveats exist about liquidity but these moves are concerning and bring back pretty painful memories of 2008. GBPUSD didnt have this bad a day in the global financial crisis and the moves by the bookies to price leave as the favourite is killing the pound.
Shortly after polling stations closed, Cook had warned of severe consequences if the result confounded recent polling. On the other hand, the collapse of a leave win, something the market has almost fully discounted, could be truly biblical. The later shifts in the pound early on Friday morning appeared to confirm those fears.
The FTSE 100 index added a solid 1.2%, or 77 points, to close at 6338 on Thursday, the highest since late April.
The FTSE and pound have been buffeted by close opinion polls during the campaign but in the past week market sentiment has swung to show growing confidence in a vote to remain in the EU. The FTSE has rallied every day this week and by Thursdays close was up 5.3% for the week so far.
The FTSEs gains were mirrored on other European bourses, with the leading share indices in Germany and France both closing up almost 2%. On Wall Street, the Dow Jones industrial average closed 1.3% up. However, those gains are now set to be unravelled dramatically as futures markets predict a significant sell off.
During polling day on Thursday, the relative quiet following months of daily referendum news had made for a tense atmosphere on City trading floors, said Joshua Mahony, an analyst at the online trading company IG.
Amid restrictions to broadcasters, there is an eerie feeling in the City, with a nervous energy evident as we await the fate of the nation, he said.
Whatever the result, volatility is likely to be the name of the game and rumours of private exit polls from the hedge funds means that there is likely to be some substantial swings as speculative positions are placed into a relatively illiquid market.