London (Reuters) – World stocks headed for one the biggest slumps on record on Friday as a decision by Britain to leave the European Union triggered 8% falls for Europe's biggest bourses and a record plunge for sterling.

Such a body blow to global confidence could well prevent the Federal Reserve from raising interest rates as planned this year, and might even provoke a new round of emergency policy easing from all the major central banks.

Risk assets were scorched as investors fled to the traditional safe harbors of top-rated government debt, Japanese yen and gold.

Billions were wiped from share values as Europe saw London's FTSE drop 6% in early deals, Germany's DAX and France's CAC 40 slump 7.5 and 9%, and Italian and Spanish markets plunge more than 11%.

Markets Were Wrong

The rout was compounded by the fact that markets had rallied on Thursday, having become increasingly convinced that U.K. voters would opt to stay in the EU.

Britain's big banks took a $130 billion battering, with Lloyds and Barclays plunging as much as 30%. EMINI S&P 500 futures ESc1 were down 4%, and Japan's Nikkei ended down 7.9%.

The British pound collapsed no less than 18 U.S. cents, easily the biggest fall in living memory, to hit its lowest since 1985. The euro in turn slid 3.2% to $1.1012 as investors feared for its very future.

Cameron Stepping Down

Having campaigned to keep the country in the EU, British Prime Minister David Cameron confirmed he would step down.

Results showed a 51.9/48.1% split for leaving, setting the UK on an uncertain path and dealing the largest setback to European efforts to forge greater unity since World War II.

Sterling sank a staggering 10% at one point, and was last at $1.3582, having carved out a range of $1.3228 to $1.5022. The fall was even larger than during the global financial crisis, and the currency was moving 2 or 3 cents in the blink of an eye.

"It's an extraordinary move for financial markets and also for democracy," said co-head of portfolio investments of London-based currency specialist Millennium Global Richard Benson.

"The market is pricing interest rate cuts from the big central banks and we assume there will be a global liquidity-add from them in the next few hours," he added.

No Asset Class Untouched

The shockwaves affected all asset classes and regions.

The safe-haven yen sprang higher to stand at 102.15 per dollar, having been as low as 106.81 at one stage. The dollar peak-decline of 4% was the largest since 1998.

That prompted warnings from Japanese officials that excessive forex moves were undesirable. Indeed, traders were wary in case global central banks chose to step in to calm the volatility.