Brexit fears have taken hold of the in British economy with the pound falling to a 31-year low against the greenback after three UK property investment funds suspended withdrawals amid concerns about the state of financial markets.
The three funds account for about one third of the £35 billion ($61 billion) invested in property funds in the UK.
Bank of England governor Mark Carney said some of the risks from Brexit had started to crystallise and the UK had “entered a period of uncertainty and significant economic adjustment.”
The pound was buying around $US1.302 this morning.
Despite the fears, the the benchmark FTSE 100 index in London rose 0.4 per cent, or 23 points to 6,545 after the Bank of England moved to bring some confidence into the market. It lowered the amount of capital that banks have to hold in reserve, freeing up £150 billion for more lending.
There are predictions the UK central bank will cut interest rates by the end of next week.
The Australian market was hard hit down 1.7 per cent in morning trade with the S&P/ASX 200 trading at 5149.6 points and the Financials sector down a whopping 2.17 per cent to 6080.2 points.
Global market are down
Meanwhile, global markets were hit by a slowdown in the manufacturing and services industries in Europe.
In the US, the Dow Jones index fell almost 0.6 per cent, or 109 points, to 17,841.
The S&P 500 fell nearly 0.7 per cent, or 14 points, to 2,089.
The Nasdaq lost 0.8 per cent, or 40 points, to 4,823.
In Europe major markets were mostly weaker.
The CAC 40 in Paris fell 1.7 per cent or 71 points to 4,163.
The DAX in Germany lost 1.8 per cent or 176 points to 9,533.
In commodities trade, spot gold rose to $US1,356.46 an ounce, West Texas Crude oil is down $US2.39 to $US46.60 a barrel on worries about Brexit.
Meanwhile, the Australian dollar has fallen against the greenback to trade at around 74.2 US cents.
Against other major currencies its buying 75.8 Japanese yen, 57.2 British pence, 67.4 Euro cents, and $NZ1.043.
With reporting by Rod Myer