The pound has been rocked by Britain's political drama
London (AFP) - Global stocks wavered on Friday on renewed concerns about rising interest rates while the British pound slumped over the UK’s political drama.
European stocks were mixed while Wall Street went from red to green after the open as investors weighed fresh company earnings and rising bond yields.
“It’s not a good look right now in sovereign bond markets and that is making things look less pretty in global equity markets,” said Briefing.com analyst Patrick O’Hare.
Sterling slid beneath $1.12 after having bounced above $1.13 Thursday following the resignation of Prime Minister Liz Truss.
The yield on the British government’s 30-year bond, or gilt, climbed back above four percent on Friday as the Conservatives’ race to replace Truss went into full swing, with her divisive predecessor Boris Johnson among the potential contenders.
The dollar also strengthened further against the yen as the US central bank is expected to pursue its aggressive rate hikes while its Japanese counterpart continues its dovish stance.
The dollar surged almost one percent to 151.53 yen, but later fell back to around 148 yen.
The yield on the 10-year US Treasury bill – the interest the government pays to borrow – has surged well past four percent.
Bond yields for governments in France and Germany also rose.
“There is still huge uncertainty over the economy, inflation and where interest rates will end up and none of that is conducive to a strong sustainable stock market recovery,” said Craig Erlam, senior market analyst at trading platform OANDA.
Analysts said investors were also tracking third-quarter earnings reports from American Express and Verizon Communications.
- ‘Bleak’ situation -
“The situation in the UK looks particularly bleak,” Erlam said.
“I’m not sure anyone is particularly confident that we’re suddenly going to see stability in government,” he said.
Truss resigned after 44 days in office, having triggered markets chaos over a tax-cutting budget due to have been funded by debt.
The pound was weighed down Friday additionally by official data showing that UK borrowing surged and retail sales slumped in September.
“This morning’s retail sales data highlighted the struggles facing consumers and businesses alike, with people spending 3.9 percent more for 6.9 percent less goods,” said Joshua Mahony, senior market analyst at online trading platform IG.
London’s FTSE 100 index managed a small gain nevertheless, but both Frankfurt and Paris ended the day lower.
US stocks were higher in late morning trading, although the Nasdaq spent much of the morning in the red as weak Snap results dragged down other tech shares.
Snap shares sank around 30 percent after reporting a $360 million quarterly loss in results that showed that online advertisers are tightening their budgets.
- Key figures around 1530 GMT -
Pound/dollar: DOWN at $1.1212 from $1.1235 on Thursday
Dollar/yen: UP at 148.07 yen from 150.15 yen
Euro/dollar: UP at $0.9806 from $0.9786
Euro/pound: UP at 87.44 pence from 87.11 pence
New York - Dow: UP 0.8 percent at 30,577.63 points
EURO STOXX 50: DOWN 0.5 percent at 3,476.63
London - FTSE 100: UP 0.4 percent at 6,969.73 (close)
Frankfurt - DAX: DOWN 0.3 percent at 12,730.90 (close)
Paris - CAC 40: DOWN 0.9 percent at 6,035.69 (close)
Tokyo - Nikkei 225: DOWN 0.4 percent at 26,890.58 (close)
Hong Kong - Hang Seng Index: DOWN 0.4 percent at 16,211.12 (close)
Shanghai - Composite: UP 0.1 percent at 3,038.93 (close)
Brent North Sea crude: UP 0.4 percent at $92.78 per barrel
West Texas Intermediate: UP 0.2 percent at $84.64 per barrel