Britain's shock vote to leave the European Union roiled global markets for a second day on Monday, hammering US and European banks, lifting bond and gold prices, and dragging the British pound to a 31-year low.

US stocks were sharply lower, following European markets, pulled down by banking stocks amid uncertainty over London's future as the region's financial capital.

The S&P financial index fell nearly 3 per cent. Declines for JPMorgan and Bank of America grew as the day wore on, with those shares down 3.56 per cent and 6.27 per cent, respectively.

The Dow Jones industrial average fell 301.63 points, or 1.73 per cent, to 17,099.12, the S&P 500 lost 42.24 points, or 2.07 per cent, to 1,995.17 and the Nasdaq Composite dropped 127.83 points, or 2.72 per cent, to 4,580.15.

An index of European bank shares fell 7.67 per cent. Royal Bank of Scotland fell 15.1 per cent, while Barclays shed 17.35 per cent, with both paring losses slightly through the day.

Italian banks also suffered. UniCredit fell 8.09 per cent. The government was looking at options to help its banks and prevent further share price falls.

European stocks took a beating for a second day, down 3.7 per cent. Banks at a seven-year low helped push London's top share index down by 2.55 per cent, shedding nearly 100 billion pounds (US $132 billion) and 5.6 per cent over two days.

“Markets already appear to be pricing in a full-blown recession in the U.K. and rising recession risk in the rest of Europe,” said David Donabedian, chief investment officer of Atlantic Trust Private Wealth Management.

British finance minister George Osborne sought to reassure markets, saying the world's fifth-largest economy was strong enough to cope with the Brexit-inspired volatility, but the positive impact on sterling was only fleeting.

But sterling sank to its lowest level against the US dollar since September 1985, falling 3.6 per cent to $1.310, surpassing its Friday low.

Yields on 10-year British government debt fell below 1 per cent for the first time.

Standard & Poor's Ratings Service stripped Britain of its last remaining triple-A credit rating, on Monday chopping it two notches to double-A and warning more downgrades could follow.

Fitch Ratings and Moody's Investors Service pulled their top rating long before the referendum campaign began.

MSCI's all-country world stock index fell 2.3 per cent.

Yields on government debt fell again. German 10-year bond yields, the benchmark for euro zone borrowing costs, fell as low as minus 0.11 per cent but held above Friday's record low of almost minus 0.17 per cent.

Spanish borrowing costs slid as election gains for the centre-right People's Party raised hopes of an end to the country's political deadlock.

In the scramble for safe-haven assets, US Treasury yields hovered near four-year lows. The 10-year note fell 12.4 basis points to 1.455 per cent, sliding further after S&P's downgrade of the UK.

“The US remains a very powerful place where people can find a safe haven. Foreigners are also getting a kick with the rise in the dollar,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.

The euro, also seen vulnerable to the exit from the EU of its second-largest economy, fell 1.2 per cent to as low as $1.098. The yen firmed as high as 101.95 per dollar. The dollar index, which tracks the greenback's value against six currencies, was up 1.1 per cent.

The rallying dollar helped drag oil prices down. US crude oil futures settled at $46.33 per barrel, down $1.31 or 2.75 per cent.

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