Shares slide as Brexit fears take hold
UK and European stock markets fell and the pound hit a fresh 31-year low as worries over the UK's vote to leave the EU continue to rattle markets.
The UK's FTSE 100 share index closed 1.3% lower. US shares initially followed suit but closed higher.
Earlier, the pound fell to $1.2798, its lowest since 1985, before rebounding.
Analysts blamed warnings from the Bank of England that Brexit risks were "crystallising" and fears about the UK commercial property market.
In late trade, the pound was at about $1.29. Sterling has dropped by about 14% against the dollar since hitting $1.50 ahead of the referendum result.
Against the euro, the pound was down 0.9% at €1.1656, having earlier hit its lowest level since 2013.
"Pessimistic predictions for sterling are coming true," said Andrew Edwards, chief executive of ETX Capital. "The pound is the chief proxy for the post-Brexit mood in the markets."
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Wall Street opened lower before making modest gains, with the Dow Jones closing up 0.4% at 17,918.62. The Nasdaq rallied 0.7% to 4,859.16 while the broader S&P 500 gained 0.54% to 2,099.73.
But in the UK, shares in domestic companies, such as supermarkets, housebuilders and banks, took the biggest hit on Wednesday.
Tesco and Morrisons were two of the biggest losers, with their shares dropping more than 7% after analysts warned of a potential price war among supermarkets.
Laith Khalaf, an analyst at Hargreaves Lansdown, said further discounting would squeeze supermarkets' margins at a time when the falling pound is set to make food imports more expensive.
The FTSE 100 finished 82 points lower at 6,463.59, while the FTSE 250 - which contains more UK-focused companies - was 65 points, or 0.4%, lower at 15,669.71.
Property-related stocks have been especially hard hit this week after several fund managers decided to stop investors withdrawing money from their UK property funds.
On Wednesday, Henderson Global Investors, Columbia Threadneedle Investments and Canada Life became the latest companies to suspend trading in their property funds.
Henderson Global Investors blamed "exceptional liquidity pressures... as a result of uncertainty following the EU referendum and the recent suspension of other direct property funds".
Michael Hewson of CMC Markets said: "The suspension of commercial property fund redemptions by a number of big players has precipitated a broader sell-off in the UK property sector including housebuilders and other asset managers."
Among the housebuilding sector, Barratt Developments fell more than 5% while Persimmon dropped 3.2%.
Investors are showing some "buyers' remorse" after last week's stock market rebound and are focusing on "weak spots of the European economy", Mr Hewson said.
Europe's financial sector, in particular, is under pressure after the European Central Bank warned that Italian lender Banca Monte dei Paschi di Siena, the world's oldest bank, had dangerously high levels of bad debt.
Shares in Deutsche Bank earlier skidded to a record low of €11.40 before recovering a little and Credit Suisse hit its lowest level since 1989, although Monte dei Paschi rose 6% to €0.28 on hopes the EU will recapitalise the lender.
Earlier, Asian stock markets had closed lower, with Japan's Nikkei index down 1.9%.
Flight to safety
Government bond yields have also fallen to record lows as investors rush to put money in perceived havens.
Yields on 10-year US, Swiss and German government bonds hit new record lows, while the return from a 20-year Japanese government bond turned negative for the first time on Wednesday.
In the UK, the yield on 10-year gilts fell to as low as 0.731%, almost half its level on the day of the referendum vote, further underlining the hit investors are willing to take to keep their money in rock-solid government debt.
High demand pushes up bond prices, and when the price of bonds rises, their yield falls.
The price of gold touched a two-year high of $1,375.45 an ounce. Also seen as a safe haven, gold surpassed the $1,358.20 mark it reached on 24 June in the immediate aftermath of the Brexit vote.