LONDON: European stock markets and the pound rebounded Tuesday, as British Prime Minister Theresa May scrambled to rescue the UK’s Brexit deal.
British unemployment data supported a recovery in the pound “as it looks to recoup recent losses which saw the currency yesterday fall to its lowest level against the dollar in 20 months”, noted David Cheetham, chief market analyst at traders XTB.
“In particular an unexpected rise in wages is seen as positive for sterling, with the 3.3 percent increase on a three-month annualised basis coming in at its highest level in over eight years.
“Having said that, this data pales into insignificance compared to the latest Brexit developments as far as the markets are concerned and on this front the ongoing uncertainty leaves the pound vulnerable to further declines,” Cheetham added.
On stock markets, bargain-buyers stepped in after Monday’s sharp losses, though losses were capped by a clouded outlook for the global economy.
The China-US trade row, signs of softness in both countries’ economies, the Huawei arrest, Brexit, demonstrations in France and volatile oil prices are among the problems facing investors.
Adding to those problems is upheaval in India — another crucial economy — where the head of the central Reserve Bank of India has resigned following a row with Prime Minister Narendra Modi’s administration over alleged government interference.
The development sent the rupee, which was already Asia’s worst-performing currency, tumbling more than one percent Tuesday, with speculation the RBI had intervened to pare the losses.
The Mumbai stock market initially fell a similar amount before bouncing back.
Global risk sentiment “is facing a towering wall of worry as virtually every major economy in the world is slowing, suggesting the synchronised global slowdown is accelerating at a much faster pace than thought”, said Stephen Innes, head of Asia-Pacific trade at OANDA.
There are meanwhile low expectations Beijing and Washington can reach a full-blown agreement that will end their trade war, with the waters muddied by the arrest in Canada of a top executive at Chinese telecoms giant Huawei.
Meng Wanzhou, Huawei’s chief financial officer and daughter of the firm’s founder, faces US fraud charges related to allegedly breaking Iran sanctions but has asked for bail.
The arrest has angered China and led to concerns it could derail the trade talks.
Elsewhere Tuesday, both main oil contracts climbed but the gains were well short of making up for the three percent losses suffered Monday on concerns an output cut agreed by OPEC at the weekend might not be enough to offset a supply glut.