Global stocks rally but sterling falters on Brexit fear

 23 Feb 2016 - 8:32

Global stocks rally but sterling falters on Brexit fear

 

 

The biggest loser of the day was the British pound, which sank against the dollar in early afternoon trading to its lowest level since March 2009 -- $1.4058 -- before recovering slightly (AFP Photo/Chris Ratcliffe)


New York: World stocks rallied Monday behind strengthening oil prices even as worries of a potential British exit from the European Union reverberated through the foreign exchange market, sinking the pound.

The FTSE 100 climbed 1.5 percent behind big gains in commodities-linked shares. Embattled mining shares like Glencore and Anglo American posted double-digit percentage gains, while oil giants Royal Dutch Shell and BP also advanced.

Bourses on the continent, too, posted solid gains, despite data showing eurozone private sector business activity slowed sharply in February. Data monitoring company Markit said its closely watched Composite Purchasing Managers Index fell to a 13-month low.

However, gains in Paris of 1.8 percent, Frankfurt of 2.0 percent and Milan of 3.5 percent likely reflected that the weak data "add to the already strong case for the ECB to deliver more stimulus at its 10 March policy meeting," said IHS in a note.

The biggest loser of the day was the British pound, which sank against the dollar in early afternoon trading to its lowest level since March 2009 -- $1.4058 -- before recovering slightly. The currency was also under pressure against the euro for much of the trading day.

Those declines came as worries mounted over a June 23 referendum vote after London Mayor Boris Johnson joined the coalition arguing that British should leave the bloc.

As sterling tumbled, Prime Minister David Cameron told the House of Commons that it was time to "properly face up to the economic consequences of a choice to leave".

"We are a great country and whatever choice we make, we will still be great," Cameron said. "But I believe the choice is between being an even greater Britain inside a reformed EU or a great leap into the unknown."

More gains ahead?

US stocks also enjoyed a strong day, with the S&P 500 climbing nearly 1.5 percent to push the index back into positive territory for February after a dismal first six weeks of the year.

But Mace Blicksilver, director of Marblehead Asset Management, said he was "cautious" about the prospect for further gains.

"I just don't think everything that was a concern two weeks ago has gone away," he said.

Key worries include doubts about the ability of oil prices to rise further and the likelihood that low interest rates will pressure bank earnings.

Global banking giant HSBC fell 2.2 percent after reporting a shock pre-tax loss in the last quarter of 2015 with results for the year missing analysts' expectations.

The bank also disclosed it was under investigation by the US Securities and Exchange Commission in relation to its hiring practices in the Asia-Pacific region.

The British bank is the latest in a growing group of banks probed for hiring "princelings," the offspring of well-connected Chinese officials, in an apparent attempt to boost the chances of winning lucrative business, potentially breaching US anti-corruption laws.

United Technologies rose 4.7 percent following reports it was approached by Honeywell and offered a premium to be acquired. Both companies declined comment. Honeywell fell 2.0 percent.

 

AFP