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Asia markets open down after post-Brexit vote slides in Europe and US shares

CNBC logo CNBC 28-06-2016 Saheli Roy Choudhury

Asia markets opened lower on Tuesday, extending the global market sell-off in the wake of the U.K. vote to leave the European Union (EU).

That followed gains in most major Asian bourses on Monday, with analysts suggesting effects of a Brexit vote would likely be short-term.

In Japan, the Nikkei 225 (.N225) was off 1.32 percent, while across the Korean Strait, the Kospi (.KS11) dropped 0.48 percent.

Australia's ASX 200 (.AXJO) was down 1.37 percent, with the financials sub-index, which accounts for nearly half of the broader index, dropping 1.44 percent. Major banking stocks in the country were under pressure, with shares of ANZ (ANZ'A-AU) down 1.72 percent and NAB (NAB'A-AU) off 1.67 percent.

Analysts said the sell-off in Australian banks were likely due to the hammering received by U.K. and European banks, with analysts cutting ratings and target prices for many financial plays. The banking sector in Europe was off 7.7 percent.

"U.K. and European banks are getting destroyed, having the worst two-day move ever," said Chris Weston, chief market strategist at spreadbettor IG.

He added, "The U.K. referendum has not just left a stain on British politics (and society), but it has unmasked a number of macro concerns that were largely smoothed over in the wake of the coordinated central action in February."

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Weston said these concerns included the solvency of the European banking sector, the impact of a stronger dollar and the prospect of further depreciation of the yuan.

The dollar (=USD) traded at around 96.374 against a basket of currencies on Tuesday morning Asia time, compared with levels below 94.00 before the outcome of the Brexit vote.

The pound took another tumble on Monday, falling to a fresh 31-year low against the dollar and extending losses to nearly 12 percent from levels before the Brexit results were announced.

As of 8:20 a.m. HK/SIN on Tuesday, the Cable (GBPUSD=) traded at $1.3227, after touching levels as low as $1.3145 overnight.

Ratings agency Standard & Poor's cut the U.K.'s credit rating on Monday, cutting it two notches, from AAA to AA, citing last week's referendum that approved a British exit from the European Union. Fitch moved its rating from AA+ to AA.

The Japanese yen (OSEJPY=) maintained strength against the dollar, trading at 101.86 as of 8:20 a.m. HK/SIN; the yen strength put Japanese equities under pressure.

Major Japanese automakers sold off, with Toyota (7203.T-JP) shares dropping 2.72 percent, Nissan (7201.T-JP) off 1.47 percent and Honda (7267.T-JP) off 2.18 percent. A stronger yen is a negative for them as it reduces their overseas profits when converted to local currency.

Stateside, the Dow Jones industrial average (.DJI) closed down 260.51 points, or 1.5 percent, at 17,140.24; the S&P 500 (.SPX) index closed down 36.87 points, or 1.81 percent, at 2,000.54 and the Nasdaq (.IXIC) composite finished down 113.54 points, or 2.41 percent, at 4,594.44.

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