Sterling recouped much of its losses yesterday after a stunning plunge amid fears over Britain’s exit from the European Union, while stocks in major markets fell after a weaker-than-expected US jobs report still did not sway expectations for a US rate hike by year-end.
Sterling plummeted in earlier trading, falling nearly 10 per cent, on what traders called a “flash crash” that knocked the British currency to a 31-year low.
Even before the sudden plunge, the currency had been under pressure this week as some national leaders called for Britain to make a “hard” exit from the EU.
Sterling was last down 1.9 per cent against the dollar at about $1.24.
After the jobs report, the dollar was little changed against a basket of currencies after rising to two-month highs although it weakened 0.6 per cent against the yen.
Data showed US employment growth unexpectedly slowed for a third month in September and the jobless rate rose. Non-farm payrolls rose 156,000, down from a gain of 167,000 jobs in August, the Labour Department said.
After the report, traders were virtually discounting chances that the Federal Reserve would raise rates at their next meeting in November, according to the CME FedWatch website. But they saw a roughly two-in-three chance for a rate hike in December, similar to bets from a day earlier.
Markets have been dominated by central bank policy, including a shift from the Bank of Japan last month, resurgence in talk of the European Central Bank possibly tapering its bond buying program, and the outlook for a Fed rate hike.
In US equity markets, the Dow Jones industrial average fell 72.56 points, or 0.4 per cent, to 18,195.94, the S&P 500 lost 11.39 points, or 0.53 per cent, to 2,149.38 and the Nasdaq Composite dropped 25.70 points, or 0.48 per cent, to 5,281.15.
The S&P industrials sector fell 1.4 per cent. Honeywell shares plunged after a disappointing profit report from the diversified manufacturer.
MSCI’s gauge of stocks across the globe fell 0.5 per cent.
The pan-European STOXX index fell 0.9 per cent.
Shares of vouchers company Edenred tumbled after a brokerage downgrade on the stock.
But Britain’s FTSE 100 index rose 0.6 per cent, propped up by the fresh slump in sterling.
In choppy trading after the jobs report, benchmark 10-year US notes were last down 4/32 in price to yield 1.7567 per cent. Yields rose to as much as 1.77 per cent, the highest in four months.
Oil futures fell, pausing after a week of price growth supported by the prospect of a crude production cut by Opec countries.
Benchmark Brent dropped 0.7 per cent to $52.14 a barrel, while US crude fell 0.6 per cent to $50.13.
Spot gold fell 0.9 per cent and was on track for its worst week this year.