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With Europe and then the U.K. Friday morning waking up to news that a majority of Brits had voted in favor of an exit from the EU, or Brexit, in a referendum and U.K. Prime Minister David Cameron saying he would step down, global stock markets and the British pound hit a 30-year low against the dollar.
The euro fell in what Bloomberg called its biggest drop since it was introduced in 1999.
U.S. stock markets also opened lower, with the broad-based S&P 500 index down 2.5 percent, while the Dow dropped 2.7 percent, or more than 400 points.
Among entertainment stocks, Discovery Communications, which has a strong presence in Britain, continental Europe and other international markets, saw its stock down 5.3 percent at $24.97, near its 52-week low of $23.74, while the stock of 21st Century Fox, which also has a broad global reach, dropped 4.2 percent, and CBS Corp. was down 3.6 percent.
Meanwhile, the stock of Viacom, which owns U.K. broadcaster Channel 5, fell 3.1 percent, Walt Disney 2.9 percent, and Time Warner fell 2.7 percent.
Analysts cited investors’ surprise by the result, a lack of clarity on what will happen next, a possible hit to trade between the U.K. and other countries and risks of a weaker British economy as key reasons for the market drops.
“Discovery Communications respects the decision of the U.K. people in this historic vote to leave the European Union,” Discovery said in a statement. “Discovery Channel first launched in the U.K. in 1989 and since then it has become one of our biggest markets and a critical creative and business hub.” It added: “As a global company with a significant presence in 220 markets, we are accustomed to operating in an industry and a world where change is constant. We will work closely with U.K. and EU leaders to successfully navigate this change and find new opportunities to shape our future. In the short-term and medium-term, our currency hedging program will significantly minimize the impact of the Brexit vote on our financial performance.”
After an early drubbing, some European markets and stocks recovered slightly, but still were much lower. London’s FTSE 100 Index of stocks fell more than 7.5 percent when it opened at 8 a.m. local time, but was down less drastically, 3.5 percent, as of 9:30 a.m. ET. The broad-based Stoxx 600 index of European stocks was down 6.7 percent. European indices had risen Thursday amid expectations that the referendum would turn out in favor of Britain’s EU membership.
Among the hardest-hit media and entertainment stocks was U.K. TV powerhouse ITV, which was down a whopping 19.6 percent at 1.762 pounds ($2.610) as of 10:15 a.m London time, after earlier losing more than 30 percent and dropping to a 52-week low of 1.410 pounds ($2.089), a level it had last hit during the second half of 2013. Meanwhile, the stock of pan-European pay TV giant Sky, in which 21st Century Fox owns a 39 percent stake, was down 9.1 percent at 8.12 pounds ($12.073) after earlier dropping 11.8 percent.
Shares of Entertainment One also fell nearly 12.0 percent, while the stock of studio space operator Pinewood Group dropped 5.7 percent.
In France, Vivendi’s stock fell 7.9 percent to 15.38 euros ($17.14) in early trading and hit a 52-week low of 14.87 euros ($16.57), its lowest level since the back-half of 2014, while Italy’s Mediaset saw its stock tank 12.6 percent. In Germany, TV giant ProSiebenSat.1’s stock dropped 6.0 percent.
Other European stock indices were also hit, with Germany’s DAX down 6.6 percent, and France’s CAC 40 down 7.9 percent after sharper drops in the early European morning. Asian markets were also lower on Friday, with Japan’s Nikkei closing down 7.9 percent.
London-based media and entertainment industry analyst Alex DeGroote of Peel Hunt tells THR European media and entertainment stocks were hit due to expectations of a “weak economy, operating leverage” and weaker advertising momentum, as well as “exposure to collapsing property prices.” He added: “Investors will favor defensive, boring names.”
Mark Mulligan, managing director of MIDiA Research, said Friday that not only big, stock market-listed companies would be affected. “There could be countless implications for the U.K. media and [related] sectors, but smaller companies such as independent labels, independent production companies and tech startups look set to be hardest hit.”
He added: “Buying goods and services from across the globe, not just Europe, looks set to become more expensive for media and tech companies of all sizes due to the weakening of the pound on the international currency markets. Though the flip side of a weakened pound is that British goods are cheaper to buy, so export demand could rise.”
When the BBC in the early morning hours London time called the referendum for the “leave” campaign, the pound traded at $1.3482, down about 10 percent, its lowest level against the dollar since 1985, with analysts on business news shows describing it as a huge move for the currency of a Western economy.
The pound had risen sharply late Thursday in what observers said was a sign that many expected a slightly bigger vote in favor of remaining in the EU.
Billionaire investor George Soros made headlines in 1992 when his fund made more than $1 billion by correctly betting that the Bank of England would fail to hold the pound in the European Exchange Rate Mechanism. In The Guardian, he predicted that in case of a Brexit, “The value of the pound would decline precipitously.” He predicted a fall “bigger and more disruptive than the 15 percent devaluation that occurred in September 1992.”
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