World Economy
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Pound Slump Continues

Pound Slump ContinuesPound Slump Continues

The aftershocks of the UK’s vote to leave the European Union continued to reverberate across financial markets, with the pound extending its selloff near a 31-year low and Asian stocks outside Japan slipping with oil.

Sterling added to Friday’s record drop and UK stock index futures tumbled more than 3%, weighed down by the prospect of months of uncertainty amid turmoil within Britain’s two major political parties and Scotland agitating anew for independence, Bloomberg reported.

The Norwegian krone led losses among the currencies of oil-exporting nations as crude slid toward $47 a barrel. Demand for haven assets boosted gold and US Treasuries, while Japanese equities rebounded from their worst day in five years on prospects the government will take steps to stabilize financial markets.

The victory for Brexit tore through world markets on Friday, pummeling the pound and high-yielding assets as more than $2.5 trillion was wiped from global equity values. Prime Minister David Cameron resigned without spelling out when the UK intends to leave the EU and eight members of Labor Party leader Jeremy Corbyn’s team quit amid calls for his ouster.

“It’s going to be a very tough week,” said James Audiss, senior investment adviser at Shaw and Partners in Sydney, which manages about $7.4 billion. “Unless an investor has a really strong view one way or the other, you’d be brave to buy in. It will be a really volatile week and people are scared to position into things.”

  Other Currencies

The pound slipped another 2% to $1.34 in Tokyo, extending Friday’s 8.1% plunge. The euro weakened 0.8% versus the greenback, after sliding 2.4% in the last session.

The krone sank 2.8%, bringing its two-day drop to about 5%, while Malaysia’s ringgit slid 0.5% as the retreat in crude prices dimmed prospects for oil-exporting nations. The Canadian dollar dropped 0.4% as the currencies of Australia and New Zealand, which are also heavily exposed to commodity markets, weakened at least 0.7%.

The yen strengthened 0.3% to 101.89 per dollar. It jumped 3.9% in the last session and climbed as high as 99.02, the strongest since 2013.

The yuan fell 0.2% after China’s central bank weakened the currency’s reference rate by 0.9%, the most since the aftermath of August’s devaluation.

The MSCI Asia Pacific excluding Japan Index fell 0.6% as benchmarks retreated in Hong Kong, Singapore and South Korea. Japan’s Topix advanced 1.3%, after plunging 7.3% on Friday.

Futures on the FTSE 100 Index tumbled 3.2%, while contracts on the S&P 500 lost 0.4%.

Financialtribune.com