Sterling rallies amid global sell-off
Sterling rallied on hopes a no deal Brexit will be avoided, but global shares took a tumble amid a sell-off in US technology shares and rising tensions in emerging markets such as South Africa.
“It has been a tough day for equities,” said Chris Beauchamp at online broker IG.
“Equities are under heavy pressure on both sides of the Atlantic, but for wildly differing reasons. European markets have fallen throughout the day, with key levels being breached as the session pushes towards its end, with trade war fears knocking Europe and a stronger pound taking a chunk out of the Ftse 100.”
It comes amid a potential breakthrough in the Brexit talks, he said.
“Meanwhile, in Washington, the spotlight has been cast on the tech sector, and inevitably a sell-off in those stocks has resulted.”
Sterling strengthened slightly to just over 90p against the euro. The US tech sell-off was led by so-called Fang shares as executives of the tech heavyweights face scrutiny on Capitol Hill.
The sell-off in emerging market currencies deepened, adding to the risk-off tone on global financial markets.
Twitter, Facebook, and Google sent the Nasdaq Composite Index down by as much as 1.6% during the Senate intelligence committee hearing on social media and foreign influences on elections.
The Stoxx Europe 600 Index sunk to its lowest since April. An emerging-market currency gauge fell to a fresh one-year low, led for a second day by South Africa’s rand.
“Trade is looking worse, emerging markets are looking worse, but you’d think Fangs are pretty insulated from some of those negatives,” said Mike Bailey, at FBB Capital Partners in Maryland.
“Just the visual of seeing folks hauled in front of Congress is probably not helping the big-cap tech names.”
The effects of Brexit and sterling on the Irish food and drink industries was highlighted by business group Ibec’s Food Drink Ireland in its pre-budget.
It is seeking Government support of €650m over three years to insulate firms by helping them tap markets beyond Britain.
“The economic contribution of the food and drink sector is greater than any other industrial sector due to agri-food’s deep linkages to the wider economy, particularly in regional areas,” said Food Drink Ireland director Paul Kelly.
“The longer-term opportunities largely remain for the Irish food and drink sector. However, the immediate response must be to ensure the sector is fit for purpose to meet the substantial challenges ahead.”
