Oil prices fell yesterday on signs that growing US output could undermine plans by other producers to cut supply, while sterling slumped following comments by British Prime Minister Theresa May alluding to an aggressive exit from the European Union.
Sterling was the big mover on currency markets, falling one per cent against the dollar and the euro to more than two-month lows after the remarks by Ms May, who said she was willing to sacrifice the country’s single-market membership for more control over its borders.
US Treasury yields retreated in line with British bond yields after Ms May’s comments.
Meanwhile, the drop in oil prices weighed on energy stocks on Wall Street as the Dow Jones Industrial Average moved further from hitting the historic and widely awaited 20,000 mark.
“In late morning trading, Brent crude was last down $1.46, or 2.56 per cent, at $55.64 a barrel. US crude was last down $1.39, or 2.57 per cent, at $52.6 per barrel.
In the US equity market, the Dow Jones industrial average fell 42.63 points, or 0.21 per cent, to 19,921.17, while the S&P 500 was down 4.01 points, or 0.17 per cent, at 2,272.97.
A gain in technology stocks lifted the Nasdaq Composite by 7.39 points, or 0.13 per cent, to 5,528.44.
US government bond prices rose, with the 10-year note up 8/32 in price to yield 2.386 per cent, compared with 2.418 per cent late on Friday. In line with US Treasuries, German 10-year yields , the benchmark for eurozone borrowing costs, fell and last stood at 0.28 per cent.
Analysts said a soft dollar weighed on US Treasuries yields as well.
The dollar slid against the safe-haven yen as risk appetite declined, while sterling sank to more than two-month lows after Ms May’s remarks.
“Anything that suggests a hard Brexit is more likely ... is very damaging to UK growth prospects,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp in New York.
The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.16 points or 0.16 per cent, to 102.06. The greenback also fell 0.4 per cent against the yen to 116.40.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.1 points or 0.25 per cent, to 438.77. Australia’s S&P/ASX200 rose 0.9 per cent while Hong Kong shares rose 0.2 per cent.
Trading was light because Japan was shut for a holiday.
The MSCI world equity index, which tracks shares in 45 nations, fell 0.88 points or 0.2 per cent, to 428.8.
A focus for the week will be a news conference on Wednesday at which US President-elect Donald Trump may give more details about the policies he will seek to implement after he takes office on January 20.
Expectations of more economic stimulus from a Trump administration have helped to boost US stocks and bond yields.