British stocks led a global market rally Tuesday as the pound slumped on renewed fears over Britain’s exit from the European Union.
KEEPING SCORE: In Europe, Britain’s FTSE 100 soared 1.8 percent to 7,107, just shy of its all-time high of 7,122. Germany’s DAX was 0.6 percent higher at 10,569 while the CAC-40 in France rose 0.9 percent to 4,494. U.S. stocks were poised for a steady opening, with Dow futures and the broader S&P 500 futures up 0.1 percent.
BREXIT FOCUS: The pound has been in focus this week as investor anxiety intensified over the British government’s plans to leave the European Union. On Tuesday, it was down a further 0.8 percent at 31-year lows of $1.2750. Because many global companies are listed on the FTSE index, and their earnings tend to benefit when the pound weakens, the FTSE 100 has surged ahead. Among the big gainers Tuesday were educational publisher Pearson, up 5 percent and Rolls Royce, 3.5 percent higher.
ANALYST TAKE: “It is a glaring reminder of the trend that has been in place since the referendum result was announced, with the FTSE focused on the present and the pound, arguably, looking to the future,” said Connor Campbell, a trader at Spreadex.
KEY US WEEK: Developments in British financial markets may be capturing the attention on Tuesday. But over the rest of the week, the U.S. will likely be increasingly in view. A raft of economic data culminates Friday with the September nonfarm payrolls report — a strong number will likely reinforce market expectations that the Federal Reserve will raise interest rates again in December.
JAPAN PRICES: Companies cut their outlook for inflation to 0.6 percent over the next year, the fifth reduction in a row, the Bank of Japan’s quarterly Tankan business sentiment survey showed, according to Kyodo News. The result suggests that the central bank might have to roll out more stimuli to achieve its 2 percent inflation goal.
CENTRAL BANKING: Australia’s central bank left its main benchmark rate unchanged at 1.5 percent following a scheduled policy meeting. The decision was the first under new governor Philip Lowe, who cited lower than average global growth as a reason for staying on hold. Investors were also awaiting a rate decision by India’s central bank.
ASIA’S DAY: Tokyo’s Nikkei 225 rose 0.8 percent to close at 16,735.65 as the weaker yen boosted shares of the country’s big export manufacturers. South Korea’s Kospi added 0.6 percent to 2,054.86 and Hong Kong’s Hang Seng index added 0.5 percent to 23,689.44. Australia’s S&P/ASX 200 edged 0.1 percent higher to 5,484.00. Benchmarks in India, Taiwan and Southeast Asia advanced. China’s Shanghai Composite Index was closed for a holiday.
ENERGY: Benchmark U.S. crude oil fell 35 cents to $48.46 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, lost 27 cents at $50.62 a barrel in London.
CURRENCIES: The euro was down 0.4 percent at $1.1164 while the dollar rose 0.8 percent to 102.55 yen.
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