Pound resumes drop at start of key Brexit week
European stock markets also retreated as weak Chinese data offset a partial trade deal between China and the United States, analysts said.
Asian investors had earlier Monday saluted the trade deal, sending regional equity markets rallying, though observers were sceptical about the overall significance of the agreement.
Official data meanwhile showed Chinese imports and exports fell more than forecast in September, as US tariffs and cooling demand at home and abroad hit trade in the world’s second-largest economy.
The figures weighed heavily on the oil market, with crude futures slumping two percent. They had surged Friday, fuelled by a blast on an Iranian tanker and news of the US-China deal.
“Although the US and China made some progress late last week and President Trump suspended tariffs due to come in in mid-October, the damage from the existing trade restrictions is being felt,” noted Fiona Cincotta, senior market analyst at City Index trading group.
She added: “The pound has dropped like a stone overnight after Brexit negotiations didn’t lead to any significant progress over the weekend.”
Sterling rallied late last week after British Prime Minister Boris Johnson and his Irish counterpart Leo Varadkar said after meeting that they could see a “pathway” to reaching a Brexit deal.
But European officials on Sunday said obstacles remained on how to manage trade and customs between EU-member Ireland and Northern Ireland, which is a part of the United Kingdom.
Time is running out to sign off on any deal at an October 17-18 European Union summit, the last such meeting before Britain’s scheduled departure from the European Union at the end of the month.
Sterling “has given back some of last week’s major gains as traders are less hopeful about the prospect of a Brexit deal being reached”, said David Madden, analyst at CMC Markets UK.
“The mood is a little less hopeful that some sort of arrangement will be struck. On Friday, UK banks, like RBS, Lloyds plus Barclays all made sizeable gains, but… they are all in the red” in midday deals.
Key figures around 1100 GMT
Pound/dollar: DOWN at $1.2559 from $1.2645 at 2050 GMT on Friday
Euro/pound: UP at 87.81 pence from 87.26 pence
Euro/dollar: DOWN at $1.1029 from $1.1035
Dollar/yen: DOWN at 108.17 yen from 108.39 yen
London – FTSE 100: DOWN 0.5 percent at 7,207.85 points
Paris – CAC 40: DOWN 0.7 percent at 5,623.94
Frankfurt – DAX 30: DOWN 0.6 percent at 12,438.63
EURO STOXX 50: DOWN 0.7 percent at 3,544.79
Hong Kong – Hang Seng: UP 0.8 percent at 26,521.85 (close)
Shanghai – Composite: UP 1.2 percent at 3,007.88 (close)
Tokyo – Nikkei 225: Closed for a public holiday
New York – Dow: UP 1.2 percent at 26,816.59 (close)
Brent North Sea crude: DOWN 2.0 percent at $59.29 per barrel
West Texas Intermediate: DOWN 2.2 percent at $53.57 per barrel
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