Brexit pushes British pound to 31-year low as world leaders plead for calm amid chaos

The Brexit fallout continued to unsettle Britain and the European Union on Monday, as another leading credit rating agency slashed the U.K. government’s rating, Britain’s leading parties were consumed by infighting and visiting Secretary of State John F. Kerry urged EU leaders to avoid “half-cocked” theatrics as they struggled to work out the mechanics and timing of Britain’s divorce from the 28-member bloc.

Following an emergency meeting in Berlin, German Chancellor Angela Merkel, French President Francois Hollande and Italian Premier Matteo Renzi said in a joint statement that they will propose Tuesday to fellow European leaders “to start a process based on a concrete time frame and precise obligations.”

The three leaders seemed eager to respond to the deeper political currents coursing beneath Britain’s shock departure in a national vote Thursday, which analysts said was driven more than anything else by fears of uncontrolled immigration and economic stagnation that have plagued the U.K. and much of the rest of Europe for the past decade.

Mr. Kerry, on a visit to Brussels, warned all sides to think before they act.

“It is absolutely essential that we stay focused on how, in this transitional period, nobody loses their head, nobody goes off half-cocked — people don’t start ginning up scatterbrained or revengeful premises,” Mr. Kerry said in the EU capital, where bloc leaders will formally begin Britain’s unprecedented divorce proceedings Tuesday.

He made the comments amid mounting fears that Europe’s post-World War II unity may crumble in the face of a potential financial crash triggered by the plummeting British pound, the value of which hit a 31-year low Monday as investors continued to eye world market reactions to the Brexit vote.

After Moody’s had already dropped the Bank of England’s bond rating from stable to negative over the weekend, Standard & Poor’s on Monday announced a downgrade of the U.K. government’s sovereign rating by two notches, saying the referendum result “will lead to a less predictable, stable and effective policy framework.”

U.S. and global stock markets were down again, and U.S. Treasury Secretary Jack Lew acknowledged the vote meant “additional headwinds” for a global economy already struggling to generate growth.

But Mr. Lew also told CNBC, “There is no sense of a financial crisis developing. I am not saying there will not be an impact on markets, but it has been an orderly impact so far.”

Britain’s move marks the first time a nation has voted to leave the EU, and key European leaders are now scrambling to establish a clear protocol by which the nation’s diplomatic, economic and security commitments to the bloc can be untangled.

The Germany-France-Italy statement said the European Union needs popular backing for its mission and “must dedicate itself to the worries expressed by its citizens.”

Such worries are widely seen to have triggered anti-EU movements around the continent in recent years, and some argue the movements will only grow in the absence of a massive internal overhaul.

“There is a rumble out there in the European jungle; and it doesn’t really have much to do with the European institutions per se,” said Gordon Adams, a longtime foreign policy analyst at American University in Washington and a fellow at the Stimson Center think tank.

“It has been rumbling for a while among German right-wing organizations, the [Marine] LePen movement in France, Geert Wilders’ Freedom Party in the Netherlands, angry Danish voters, and unhappy Hungarians,” Mr. Gordon wrote in an analysis published Monday by The Washington Spectator.

“The Brexit vote, close as it was, was less about Brussels and bureaucrats than it was about policymakers being out of touch with a populace that has been ignored and unheard for too long, about a wave of unhappiness that is growing across Europe and in the United States,” he wrote. “The unhappiness is about powerlessness, job loss, about income and wealth gaps, societal change, and above all, disengaged institutions and policy-makers who pretend they hear, but do not, do not respond, and seem not to care.”

China and Russia react

Speculation is also surging over how other world powers — particularly Russia and China — may seize upon the development.

Russian President Vladimir Putin offered a muted reaction to the British vote, but Russian and Western analysts say the Kremlin is poised to exploit the cracks in EU unity by ramping up relations and pressure on Eastern European members of the bloc. Some Russian commentators said the absence of London from EU internal debates could benefit Russia.

“The long-term results will be rather advantageous, since the absence of the U.K. in the EU makes continental Europe more open to negotiations,” Timofei Bordachev, director of the Center for Comprehensive European and International Studies in Moscow, told the news website Russia Beyond the Headlines.

But many believe it’s China that will benefit most during the coming years, particularly if Britain and the EU begin reworking the various free trade deals that define the bloc’s economic position in the world.

While Beijing may face an initial blow from weaker European demand for its exports, economists and political analysts say “Brexit” is likely to find both Britain and the EU pining for new business with cash-rich Chinese companies that are expanding abroad — with the possible bonus for Beijing of closer political ties to both London and Brussels.

Zhang Lihua, director of the Center for China Europe Relations at Tsinghua University in Beijing, told The Associated Press on Monday that “one of the benefits China can gain from ’Brexit’ is a stronger and closer economic relationship with the U.K. and even with the EU.”

“Both the U.K. and the EU need that kind of cooperation with China under the current circumstances,” he said.

Chinese leaders, who urged Britain to stay in the EU ahead of the referendum, have so far avoided any mention of the potential benefits at play for Beijing. Premier Li Keqiang, the country’s top economic official, said Monday that China wants a “united and stable” EU and a “stable and prosperous” Britain.

“We are seeing increasing uncertainties in the world economy,” Mr. Li said. “We need to jointly handle challenges, strengthen confidence and create a stable international environment.”

The message is being pushed by the Obama administration. “It’s critical as we go forward in these next days to understand the importance of a strong EU,” said Mr. Kerry, who appeared in Brussels alongside the EU’s top diplomat, Federica Mogherini.

“The United States cares about a strong EU,” Mr. Kerry said, on issues ranging from climate change and counterterrorism to immigration policy.

Later in the day, Mr. Kerry told an audience in London that the U.S.-U.K. special relationship also remains undiminished.

But the secretary of state also said he regretted the outcome of last week’s vote, and he seemed Monday to be on a mission to console British leaders, including Prime Minister David Cameron, who had lobbied to remain in the EU and has since announced plans to resign.

British Foreign Secretary Philip Hammond, who appeared in public with Mr. Kerry, said anger over the vote’s outcome would help no one, but also acknowledged emotions were still “raw.”

• This article is based in part on wire service reports.