The British pound sank amid comments by the Bank of England governor on the impact of Brexit. Global stocks advanced as technology shares continued a rebound and remarks from a Federal Reserve official allayed concerns over the U.S. economy.
The U.K. currency tumbled and government bonds rose as BOE Governor Mark Carney said he is still worried about the impact of Brexit on the economy and signaled he won’t be rushing to raise interest rates anytime soon. Tech shares in the MSCI All-Country World Index advanced for a second day, after the Nasdaq 100 Index jumped the most since November. Hong Kong equities retreated ahead of MSCI Inc.’s decision on whether to include China’s domestic equities in benchmark indexes.
In his first major comments in six weeks, the Carney addressed weaknesses in the economy, saying that domestic inflation pressures remain subdued and wage growth is anemic. He also highlighted the level of uncertainty surrounding the U.K.’s talks to exit the European Union, saying he wants to see how the economy responds to the “reality of Brexit negotiations.”
Treasuries fell Monday after Fed Bank of New York President William Dudley said halting the tightening cycle now would imperil the economy. Dudley aligned himself with Chair Janet Yellen in declaring his expectation that a tight labor market will eventually trigger a rebound in inflation data that has been unexpectedly weak in recent months.
His comments were followed by remarks from Chicago Fed President Charles Evans, who said “the current environment supports very gradual rate hikes and slow preset reductions in our balance sheet.” Fed officials last week raised their benchmark interest rate for the third time in six months and pushed ahead on plans to begin reducing the central bank’s $4.5 trillion balance sheet later this year, despite growing concerns over stalling inflation.
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Here are some of the key upcoming events:
- Vice-Chair Stanley Fischer speaks Tuesday, with Fed officials making making appearances throughout the week. Still to come: Eric Rosengren, Robert Kaplan, Jerome Powell, James Bullard and Loretta Mester.
- MSCI announces whether it approved Chinese-listed stocks in its global benchmarks. The $6.8 trillion onshore market is the world’s second largest and accounts for 9 percent of global stock value, but has been rejected for index inclusion three times by MSCI over issues including capital controls and long trading halts. MSCI’s decision is expected Tuesday after the close of U.S. markets.
Here are the main moves in markets:
- The Stoxx Europe 600 increased 0.1 percent as of 8:37 a.m. in London, paring gains after Carney’s comments.
- Japan’s Topix rose 0.7 percent to the highest since August 2015 amid weakness in the yen.
- Australia’s S&P/ASX 200 Index slipped 0.8 percent. The country’s largest banks retreated following ratings downgrades from Moody’s Investors Service.
- Hong Kong’s Hang Seng Index fell 0.3 percent, reversing an earlier gain of 0.5 percent, and the Shanghai Composite Index dropped 0.1 percent.
- Futures on the S&P 500 Index rose less than 0.1 percent. The underlying gauge rose 0.8 percent Monday as tech and health-care shares climbed.
- The British pound fell 0.5 percent to $1.2674, erasing an earlier gain. The euro was flat at $1.1146.
- The Bloomberg Dollar Spot Index was little changed, after advancing 0.4 percent on Monday. The measure touched the lowest level since October last week.
- The yen fell 0.1 percent to 111.62 per dollar. The currency retreated 0.6 percent on Monday. The South Korean won dropped 0.3 percent.
- The New Zealand dollar climbed 0.5 percent, reversing earlier declines.
- The yield on 10-year Treasuries fell less than one basis point to 2.18 percent, after rising four basis points Monday.
- Benchmark yields in the U.K. added three basis points.
- Oil rose 0.3 percent to $44.32 a barrel, after settling at the lowest level since November on Monday. Investors are weighing a forecast decline in U.S. crude stockpiles against a revival in output from Libya, which is exempt from the OPEC-led cuts.
- Gold climbed 0.2 percent to $1,246.88 an ounce, after closing Monday at the lowest in more than a month.