Monday, 29 May, 2017

Sterling soars, stocks and US dollar fall on geopolitical concern; gold up

A stock quotation board displaying Japan's Nikkei average is seen before a ceremony marking the end of trading in 2016 at TSE in Tokyo A stock quotation board displaying Japan's Nikkei average is seen at the Tokyo Stock Exchange in Tokyo Japan
Juana Turner | 21 April, 2017, 00:38

Sterling jumped alongside gold, while stocks and the USA dollar fell on Tuesday after Britain called a snap election for June, adding to investor concerns over geopolitical instability.

It sent the pound up more than 0.4% against the USA dollar to 1.261, recovering from a 0.3% drop just an hour earlier.

U.S. Vice President Mike Pence said on Wednesday that Washington would work with its allies and China to put economic and diplomatic pressure on North Korea after its failed missile test over the weekend.

Polls have for months shown far-right leader Marine Le Pen and Macron qualifying this Sunday for the May 7 run-off, but it remains a contested, four-way vote with conservative Francois Fillon and far-left candidate Jean-Luc Melenchon.

Investors are also concerned that the recent flaring of geopolitical tensions has shifted focus away from expected business-friendly reforms in the United States, seen as the fuel for the US equity rally that peaked in early March.

The meeting comes fresh of the heels of comments from U.S. President Donald Trump, after he told the Wall Street Journal that the dollar was "getting too strong".

The FTSE 100 fell 0.1 percent to 7,142.30 while France's CAC 40 rose 0.2 percent to 4,999.18 and Germany's DAX gained 0.2 percent to 12,025.24.

In commodity markets, profit taking nudged gold down 0.4 percent to $1,287.10 an ounce, and away from Monday's peak of $1,295.42.

Emerging market stocks lost 0.68 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan declined 0.6 percent, marking its lowest level since mid-March.

Deutsche Bank said the surprise election call is a "game-changer" for the currency, and that it will raise its forecasts for the pound in the coming days.

Analysts said the drop in US Treasury yields pressured the dollar, while US manufacturing output dropped for the first time in seven months.

After the British pound took centre-stage on Tuesday with its second-largest one-day rise since 2008, the Australian dollar was the biggest mover on major currency markets on Wednesday, sliding 0.7% as iron ore prices took a dive.

Sterling hit highs of $1.2837 against the dollar on Thursday morning, rebounding after weakening to below $1.28 yesterday evening.

Oil prices were weighed by concerns that USA production growth is undermining efforts to cut oversupply after a US government report said shale oil output in May was expected to post the biggest monthly increase in more than two years.

Brent crude was last little changed at $54.93 a barrel, while US crude was also steady at $52.42.

Safe-haven bonds had found support ahead of France's presidential election and on the heightened tensions between the United States and North Korea.

Meanwhile, EUR/USD traded at $1.0711 while EUR/GBP added 0.26% to 0.8378, as investors eyed the first round of the French presidential election, scheduled for April 23.

Copper lost 1.94 percent to $5,581.50 a tonne.

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