European Periphery Stocks Tumble Most in World After Brexit Vote

  • Spanish elections on Sunday also seen adding to uncertainty
  • Greece’s Eurobank Ergasias, Alpha Bank slide most on Stoxx 600

Stocks in Greece, Italy and Spain tumbled the most in the world after the U.K. voted to leave the European Union as investors fled what are perceived to be the region’s riskier markets.

Stocks in so-called peripheral nations led declines as European equities posted their worst day since 2008. The ASE Index plunged 13 percent, the most out of 94 indexes tracked by Bloomberg. Spain’s IBEX 35 Index and Italy’s FTSE MIB Index closed with losses of more than 12 percent. Portugal’s PSI Index dropped 7 percent.

The prospect of a U.K. secession had already prompted warnings of a slowdown in European growth and the possibility of other members seeking to leave the bloc. Periphery stocks are now seen as most vulnerable because of their weaker fiscal positions and higher unemployment, said Guillermo Hernandez Sampere, the head of trading at MPPM EK.

“Lower growth would be a disaster for those countries,” Sampere said in an e-mail. Southern European companies “depend upon the perception of support from the process of European integration and this integration got hit hard this morning. They’ll probably continue to underperform as volatility will remain high for a few days.”

Prime Minister David Cameron announced his resignation after the results showed a 52 percent majority rejected his pro-EU campaign. While he said he would stay on for another three months, the result now sets the U.K. up for years of divorce talks with the first round likely to come at an EU leaders’ summit next week. Britain must now count the economic and financial cost of an exit that Cameron warned would spark a recession. 

Adding to the uncertainty, Spain holds elections Sunday, with polls forecasting no outright winner, fueling speculation about its economic path as political leaders negotiate to form a government. If anti-austerity party Podemos overtakes the socialist party as the second-biggest political force after acting Prime Minister Mariano Rajoy’s People’s Party, that will also drag on stocks, Sampere said.

Lenders led the retreat among the region’s equities, with Greece’s Eurobank Ergasias SA and Alpha Bank AE tumbling 30 percent, for the biggest declines on the Stoxx Europe 600 Index.

Before it's here, it's on the Bloomberg Terminal.