European stocks slipped again, and sterling and the euro remained volatile yesterday, as one of the most dramatic twists yet in the Brexit process compounded another turbulent week for world markets.
London, Paris and Frankfurt struggled to maintain a modest early bounce having been battered the previous day when Britain’s Brexit minister quit in protest over a draft deal with Brussels on leaving the European Union.
Wall Street tech stocks looked set to take a hit, with Nasdaq futures pointing more than 1 per cent lower as disappointing results from United States chipmaker Nvidia Corp hit the chip sector globally.
Sterling faired a little better than on Thursday when it slumped more than 2 cents versus the dollar in what was also its worst day against the euro since the post-Brexit vote fallout of 2016.
But with reports of a UK political coup still rife and a fear that the country could crash out of the EU without a divorce deal, it couldn’t get much beyond 88.50 pence per euro and $1.2875 on cable.
UK and euro zone government bond yields edged up as some stability returned to fixed-income markets.
Still, 10-year yields on German bonds, considered one of the safest assets in the world, were set for their biggest weekly fall in three weeks, in a sign that Brexit uncertainty and worries about Italy’s finances continued to support demand.
In Frankfurt, the head of the European Central Bank, Mario Draghi, said the bank still plans to dial back its stimulus at the end of the year, but acknowledged the economy had hit a soft patch and inflation may rise more slowly than expected.
“If firms start to become more uncertain about the growth and inflation outlook, the squeeze on margins could prove more persistent,” Draghi told a conference.
Some of Europe’s biggest funds who took part in a Reuters summit this week said they now think Mr Draghi will be the first president in the ECB’s history not to have raised interest rates during their term.
Europe’s tech stocks suffered but Brexit remained the region’s main focus. Fears that UK Prime Minister Theresa May’s hard-fought deal could collapse had sent British markets into gyrations not seen since the June 2016 referendum on EU membership.
Britain’s FTSE 100 was at a three-week low, down 0.85 per cent, with FTSE 350 bank stocks down 1.4 per cent as lender RBS slid a further 4 per cent.
In commodity markets, the weaker dollar gave gold a leg up to $1,223.
Oil prices rose too, helped by a decline in US fuel stockpiles and the possibility of a cut in Opec output.
United States crude was trading up 80 cents at $57.27 and Brent crude rose roughly 1 dollar to $67.65 a barrel. It was still set for a sixth straight weekly loss, however.