European shares fall, sterling dives on Brexit comments

[Jonathan Fairfield]

European shares fall, sterling dives on Brexit comments

By Nigel Stephenson

 

A worker shelters from the rain under a Union Flag umbrella as he passes the London Stock Exchange in London, Britain, October 1, 2008. REUTERS/Toby Melville/File Photo

 

LONDON (Reuters) - The dollar edged up on Monday, boosted by robust U.S. wage growth data that strengthened the case for more U.S. interest rate rises, while Britain's pound fell on comments by Prime Minister Theresa May seen as pointing to a "hard" Brexit.

 

Britain's blue-chip FTSE 100 index <.FTSE> nonetheless hit a record high as the first full trading week of 2017 on London markets began. The pan-European STOXX 600 index <.STOXX> dropped 0.5 percent in early deals.

 

Wall Street, which hit record highs on Friday, also looked set for a cautious start, with index futures <ESc1> <1YMc1> lower as oil prices fell.

 

Britain's pound was the big mover on currency markets, falling 1 percent against the dollar and the euro, in reaction to weekend comments from May that were interpreted as suggesting that she would prioritize reducing immigration over access to the European Union single market when Britain leaves the EU.

 

"The rise in the FTSE is really down to the weakness in sterling, but the Brexit news is not great so I don't see the FTSE gaining too much," said Ipek Ozkardeskaya, market strategist at London Capital Group.

 

In Asia, MSCI's ex-Japan Asia-Pacific shares index <.MIAPJ0000PUS> was up 0.1 percent, having earlier risen as much as 0.5 percent. Australia's S&P/ASX200 <.AXJO> rose 0.9 percent while Hong Kong shares <.HSI> rose 0.2 percent.

 

Trading was light because Japan was shut for a holiday.

 

TRUMP STIMULUS

 

A focus for the week will be a news conference on Wednesday at which U.S. President-elect Donald Trump may give more details of the policies he will seek to implement after he takes office on Jan. 20.

 

Expectations of more economic stimulus from a Trump administration have helped to boost U.S. stocks and bond yields.

 

The Dow Jones Industrial Average <.DJI> came within one point of the 20,000 mark for the first time on Friday while the S&P 500 <.SPX> and Nasdaq <.IXIC> hit record highs.

 

Friday's closely-watched U.S. employment report showed that fewer jobs were created last month than forecast, although a rebound in wages pointed to economic strength and set the stage for more Fed hikes later in the year.

 

The dollar index <.DXY>, which measures the greenback against a basket of currencies, rose 0.1 percent on Monday. The euro <EUR=> weakened marginally to $1.0525 while the yen <JPY=> rose 0.3 percent to 116.64 per dollar.

 

Sterling <GBP=D4> fell 0.9 percent to $1.2166, having touched its lowest since late October at $1.2122, and weakened more than 1 percent against the euro <EURGBP=> to an eight-week low of 85.65 pence.

 

This followed comments from May that she was not interested in keeping "bits of membership" of the European Union when Britain leaves - even though she said on Monday that she had said nothing new in Sunday's interview.

 

"May saying that it's not about keeping 'bits' of the EU suggests it's not going to be about keeping access to the single market," said HSBC currency strategist Dominic Bunning.

 

GERMAN BONDS

 

The German 10-year government bond yield <DE10YT=TWEB>, the benchmark for euro zone borrowing costs, last stood at 0.28 percent, down 1.5 basis points on the day.

 

It earlier rose close to 0.33 percent, its highest since Dec. 19, after data showed German exports rose 3.9 percent in November, their strongest monthly gain since May 2012 and far ahead of forecast.

 

Oil prices fell on signs of growing U.S. production outweighing optimism that other producers were sticking to a deal to cut output to bolster prices. [O/R]

 

Brent crude <LCOc1>, the international benchmark, last traded at $55.96 a barrel, down $1.14 cents or 2 percent.

 

"We see the optimism surrounding OPEC and non-OPEC production cuts being counterbalanced by fears of higher U.S. crude production as the higher rig count of last Friday still weighs," said Hans van Cleef, senior energy economist at ABN

Amro.

 

(Additional reporting by Saikat Chatterjee in Hong Kong, Jemima Kelly, Marc Jones, Dhara Ranasinghe and Karolin Schaps in London; Editing by Kevin Liffey)

 

 

-- © Copyright Reuters 2017-01-09

[dieseldave1951]

May should keep her moth shut until she has something (concrete) positive to say

[Baerboxer]

3 hours ago, dieseldave1951 said:

May should keep her moth shut until she has something (concrete) positive to say

 

I read she was trying to backtrack (again) fairly soon after she realized what she'd said.

 

Quite frankly, she looked just about out of her depth as HS. As PM, with a divided party, lackluster cabinet and the most contentious issue in decades, she looks totally lost.

Sadly, there doesn't seem anyone in any of the political parties who looks remotely like a star in waiting to replace her.

[blazes]

4 hours ago, dieseldave1951 said:

May should keep her moth shut until she has something (concrete) positive to say

 

She could use some moth-balls, perhaps.  As for a "concrete" something....do you mean concrete as in "hard Brexit"?

[elgordo38]

17 hours ago, Jonathan Fairfield said:

comments by Prime Minister Theresa May seen as pointing to a "hard" Brexit.

Yes you get comments like this and now the Fed Reserve is letting their pack of hounds loose on the public as well to spread distortions of multiple interest rate hikes which we all know will never happen. In a global community you cannot have one country raising rates while other countries rush to debase their fiat money. They end up playing with peoples financial lives in their political poker game. We just give way to much respect to people that have truly well f**** up the world. 

[dunroaming]

Clearly Brexit is beyond May's capabilities but in her defence it seems to be beyond everyone else's capabilities as well.  There is a wish list and a target list and an achievable list and they are all different.  To add to the chaos there are the promises made before the referendum which are undeliverable.

 

Controlling immigration was the driving force for Brexit and the Brexiteers will feel cheated if that is not delivered.

[kamahele]

There is no evidence that the Brexit will not be "hard" as she said. Seasoned politicians often try to soften the blow to avoid this kind of reaction, but at some point one must tell the truth. The unraveling of this agreement is a big deal and even if this will make the UK the land of milk and honey as Brexit promoters promise,  the process of undoing the agreement will not be a piece of cake and the markets will react negatively to any uncertainties.