Pound sinks on ‘Brexit’ risks

The Pak Banker - - MARKETS/SPORTS -

The pound slid as a split in the U.K.'s rul­ing party over Euro­pean Union mem­ber­ship in­creased the po­ten­tial for an exit from the bloc. Stocks across the globe ral­lied, send­ing Dubai shares into a bull mar­ket, as oil re­bounded and me­tals ad­vanced.

The U.K. cur­rency weak­ened the most in a year against the dol­lar af­ter Lon­don's Con­ser­va­tive Mayor Boris John­son said he'll cam­paign for Bri­tain's exit from the EU, op­pos­ing Prime Min­is­ter David Cameron. The de­bate's im­pact on broader mar­kets was lim­ited as the MSCI All Coun­try World In­dex of shares headed for the high­est close since Feb. 4. Crude re­cov­ered most of Fri­day's losses while lead and zinc were among the big­gest gain­ers on the Lon­don Metal Ex­change. The week­end ouster of China's chief mar­ket reg­u­la­tor sparked equity in­creases in Shang­hai and Hong Kong. Trea­suries, gold and the yen de­clined.

While Bri­tain's cur­rency was roiled by the specter of an exit from the world's largest sin­gle mar­ket, stocks main­tained mo­men­tum af­ter their best week since Oc­to­ber pulled them up from near a 2 1/2year low. The re­moval of Xiao Gang from the helm of the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion comes as lead­ers seek to at­tribute re­spon­si­bil­ity for Jan­uary's mar­ket rout, which un­der­mined con­fi­dence in the au­thor­i­ties and rocked trad­ing glob­ally. Oil traders are con­sid­er­ing how much of a boost prices would get from an out­put freeze led by Rus­sia and Saudi Ara­bia.

"The fact that prom­i­nent mem­bers of the Con­ser­va­tive Party an­nounced they will cam­paign for Bri­tain to leave the EU likely un­der­scored in­vestors' con­cerns that Brexit risks could in­crease from here," said Valentin Mari­nov, head of Group-of-10 cur­rency strate­gist at Credit Agri­cole SA's cor­po­rate and in­vest­ment-bank­ing unit in Lon­don. "The pound is tum­bling."

The pound fell 1.6 per­cent to $1.4175 at 10:37 a.m. Lon­don time, while the Stoxx Europe 600 In­dex was 1.6 per­cent higher and the MSCI All Coun­try World In­dex added 0.4 per­cent. Cop­per reached $4,701 an ounce, the high­est since Feb. 4. West Texas In­ter­me­di­ate was up 3.3 per­cent at $30.63 a bar­rel.

The Stoxx 600 was led higher by min­ers and car­mak­ers. BHP Bil­li­ton Ltd. and Rio Tinto Group jumped more than 5 per­cent, among the big­gest gains in Bri­tain's FTSE 100 In­dex, as ris­ing me­tals prices boosted com­mod­ity pro­duc­ers.

U.K. eq­ui­ties added 1.2 per­cent. The FTSE 100 this year is the best per­former among ma­jor na­tional mea­sures in western Europe, helped by a weak­en­ing pound.

Deutsche Telekom AG added 2.4 per­cent af­ter scrap­ping a plan to sell its Dutch busi­ness. HSBC Hold­ings Plc fell 3.3 per­cent af­ter post­ing a quar­terly loss, hurt by a de­cline in in­come from lend­ing, higher loan­im­pair­ment charges and fair-value losses on its debt. Fu­tures on the Stan­dard & Poor's 500 In­dex ex­pir­ing in March rose 1.2 per­cent, in­di­cat­ing eq­ui­ties will ex­tend gains af­ter post­ing their strong­est weekly ad­vance since Novem­ber. Al­ler­gan Plc is among four S&P 500 mem­bers post­ing earn­ings on Mon­day.

In­vestors will also look to a pre­lim­i­nary gauge of Fe­bru­ary man­u­fac­tur­ing ac­tiv­ity for an in­di­ca­tion of the health of the world's big­gest econ­omy, with econ­o­mists fore­cast­ing an in­crease in the pace of out­put. Dubai's DFM Gen­eral In­dex rose 2.5 per­cent to 3,170.27 on Mon­day, bring­ing its gain since a Jan. 21 low above the 20 per­cent thresh­old for a bull mar­ket.

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