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GLOBAL MARKETS-Stormy sterling sinks again, stocks wilt before Fed

Published 07/30/2019, 05:18 PM
Updated 07/30/2019, 05:20 PM
GLOBAL MARKETS-Stormy sterling sinks again, stocks wilt before Fed
UK100
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DE10YT=RR
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* Pound sinks to 28-mth low on heightened no-deal Brexit
woes
* European stocks wilt as results drag ahead of Fed
* BOJ stands pat on monetary policy, says will ease if
needed
* World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Marc Jones
LONDON, July 30 (Reuters) - Brewing no-deal Brexit worries
sent the pound sinking towards a two-year low versus the euro
and roughed up Irish bonds on Tuesday, while stock markets
wilted before what is expected to be the first cut in U.S. rates
since the financial crisis.
Europe's markets suffered a stormy start as the pound
followed its worst day of the year with another 0.5% swoon
against all the major currencies. FRX/
A blizzard of fiery talk on Monday that included the new UK
Prime Minister Boris Johnson calling his predecessor's Brexit
plans dead and its new foreign minister labelling the European
Union "stubborn" kept the slide intact.
Sterling GBP=D3 fell as far as $1.2120, which was its
lowest against the dollar since March 2017, and to 91.85 pence
per euro, the weakest since September 2017.
Options markets were pointing to more pain too. Three-month
implied volatility, a contract that expires just before the Oct.
31 Brexit deadline, jumped to over 11 vols, the highest since
before March 29, the original date for Britain to leave the
European Union.
"The pound is in a very precarious state, it is as simple as
that," said TD Securities' European head of currency strategy
Ned Rumpeltin.
"We are now in a different regime," he said, referring to
Johnson's explicit agenda of taking Britain out of the EU,
whether or not transitional trading agreements are in place.
It was not just sterling reeling either.
Irish government bond yield spreads over Germany hit their
widest levels in over a month at 24 basis points, on worries
about the damage a no-deal Brexit would do to Ireland's economy.
Other euro zone government bond yields were holding near
recent lows ahead of the Federal Reserve meeting which is
expected to deliver a 25 basis point rate cut on Wednesday and
potentially signal more on the way.
Germany's 10-year government bond yield DE10YT=RR was
hovering near the minus 0.40% mark. GVD/EUR
European shares slipped as grim forecasts from German
chemicals and drugs giant Bayer and airline Lufthansa soured
sentiment, although the weakness of the pound kept London's
blue-chip FTSE index .FTSE just about out of the red. .EU
With concerns about global growth still bubbling among
investors, a GfK survey also showed German consumer morale
worsening for the third month in a row heading into August as
trade disputes bit in Europe's biggest exporter.
"Most markets are down this morning," said Simona Gambarini,
a markets economist at Capital Economics. "The S&P closed lower
yesterday. We have a few data releases regarding the eurozone
that could push equity prices down but I think everyone is
waiting for the Fed meeting."

AUSSIE GOLD
Asia had been a bit more positive overnight.
Japan's Nikkei .N225 rose 0.4%, showing limited reaction
to the Bank of Japan's widely anticipated decision to stand pat
on monetary policy. Shanghai .SSEC rose 0.3% and Hong Kong's
Hang Seng edged up 0.2%.
Australian stocks .AXJO stole the glory again though with
another record high, as buoyant mining shares added to
tech-driven gains the previous day.
The BOJ added that it would ease policy again "without
hesitation" if the economy loses momentum for achieving the
central bank's 2% inflation target.
Also drawing some attention were U.S.-China trade
negotiations which begin in Shanghai on Tuesday, although
expectations for progress during the two-day meeting are low
with the markets hoping the two sides can at least detail
commitments for "goodwill" gestures.
Among commodities, crude oil prices extended the previous
day's gains, with the Fed's expected easing fuelling optimism
that it would boost the economy and fuel demand in the world's
biggest oil consumer. O/R
U.S. crude futures CLc1 were up 0.65% at $57.24 per barrel
and Brent crude LCOc1 added 0.6% to $64.09. Gold XAU= was
down 0.1% at $1,425 per ounce.

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