Pound sinks on ‘Brexit’ risks
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.