The pound dived to fresh 31-year lows Wednesday, bond yields were squeezed and equities hammered as the growing shadow of the Brexit vote over the global economy sent traders fleeing to safety.

With last week's global rally -- inspired by promises of central bank stimulus after the poll -- consigned to history, high-risk assets such as emerging currencies and oil have also been sent tumbling as fresh fears kick in.

Safe-haven assets gold and silver reached two-year highs Wednesday, while yields on high-quality government bonds dropped further, and the yen and the Swiss franc rose again.

The pound, however, sank to $1.2798 at one point, its lowest level since June 1985, before bouncing back up above $1.29.

"Just when you thought it was 'safe to go back in the water', the pound got pounded as speculation around Brexit forms into something more concrete," said Stephen Innes, senior trader at OANDA Asia Pacific.

London's FTSE 100 index was down 1.4 percent in mid-afternoon trading, while Frankfurt's DAX 30 and the CAC 40 in Paris both dropped by 1.8 percent.

Shares in Banca Monte dei Paschi di Siena rebounded in Milan after two straight session of heavy losses on hopes that the Italian government will help find a solution to the bank's debt problems. Some analysts fear a bank crisis in Italy and eurozone turmoil are looming.

Shares in Telecom Italia plunged following an announcement that Italy could soon get a low-cost mobile operator.
Wall Street opened slightly easier, but quickly slid further down.

Japan's Nikkei stock index closed down 1.9 percent -- having shed more than three percent at one point -- while Hong Kong lost 1.2 percent. Seoul 1.9 percent and Sydney eased 0.6 percent but Shanghai bounced in the afternoon to end up 0.4 percent.

Some analysts said the worst may not be over for the British currency.

"Even though investors should by now have priced into sterling slower growth, lower rates, renewed quantitative easing and prolonged political discord that does not mean they cannot mark it down further," analysts at Moneycorp said.

Hefty selling began in Europe on Tuesday afternoon when the head of the Bank of England said there was "evidence that some risks have begun to crystallise" following the shock June 23 vote for Britain to leave the European Union.

The BoE also relaxed commercial banks' capital requirements to boost lending, which analysts said indicated it was prepared to further loosen monetary policy to support the British economy.

The measure provided support Tuesday to London stocks, but was unable to prevent a sell-off elsewhere.

Adding to the sense of gloom was news that three commercial property funds worth billions of dollars had suspended trade and blocked client redemptions.

The moves come as fears grow that the vote will lead companies -- particularly banks in London -- to shift operations from Britain, fuelling a surge in selling and a slump in prices.

Europe's financial sector is already under pressure after the European Central Bank warned Italy's number-three lender Banca Monte dei Paschi di Siena, the world's oldest bank, had dangerously high levels of bad debt.

Emerging market currencies floundered with South Korea's won losing 0.8 percent against the dollar, while the Indonesian rupiah shed 0.2 percent and the Malaysian ringgit 0.7 percent. Australia's dollar also sank 0.9 percent.

And the yield on Japanese 20-year government bonds dipped below zero for the first time, while other maturities also fell to new lows.

The drop underscored that investors were willing to sacrifice earnings and even accept small losses to keep their money in rock-solid government debt.

In Europe, the yield on 10-year German government bonds pushed below -0.20 percent to strike a record low of -0.205 percent.

On oil markets, both Brent crude and West Texas Intermediate were down.

London - FTSE 100: DOWN 1.4 percent at 6,452.54
Frankfurt - DAX 30: DOWN 1.8 percent at 9,360.00
Paris - CAC 40: DOWN 1.8 percent at 4,090.50
New York - DOW: DOWN 0.6 percent at 17,840.62
Euro Stoxx 50: DOWN 1.8 percent at 2,762.97
Tokyo - Nikkei 225: DOWN 1.9 percent at 15,378.99 (close)
Hong Kong - Hang Seng: DOWN 1.2 percent at 20,495.29 (close)
Shanghai - Composite: UP 0.4 percent at 3,017.29 (close)
Pound/dollar: DOWN at $1.2952 from $1.3028 Tuesday
Euro/dollar: DOWN at $1.1079 from $1.1075
Dollar/yen: DOWN at 100.80 yen from 101.75 yen