Brexit worry hits pound; Europe stocks extend gains

Bloomberg

The pound sank with gilt yields as Britain’s central bank governor underlined his dovish stance in the face of Brexit. European stocks rose a third day amid a bullish mood for equity investors, and the dollar was steady as this week’s stream of Fed speakers continued.
The UK currency weakened a second day as Bank of England Governor Mark Carney said he is still worried about the impact of Brexit on the economy and signaled he won’t be rushing to raise interest rates anytime soon.
Sterling’s weakness boosted the UK’s benchmark equity index, which gained along with most European measures. Hong Kong shares retreated ahead of MSCI Inc.’s decision on whether to include China’s domestic equities in its main indexes.
Governor Carney’s first major speech since May comes a day after negotiations over Britain’s exit from the European Union formally began, and his comments addressing weakness in the UK economy and subdued inflation join a raft of talking points for investors this week. MSCI’s announcement is due in a matter of hours, while the latest in a string of appearances from US central bank officials saw Federal Reserve Vice Chairman Stanley Fischer speaking in Amsterdam.
Treasuries fell on Monday after Fed Bank of New York President William Dudley said halting the tightening cycle now would imperil the economy. His comments were followed by remarks from Chicago Fed President Charles Evans, who said “the current environment supports very gradual rate hikes and slow preset reductions in our balance sheet.”
Still to come on the Fed speaker list: Eric Rosengren, Robert Kaplan, Jerome Powell, James Bullard and Loretta Mester. MSCI announces whether it approved Chinese-listed stocks in its global benchmarks. The $6.8 trillion onshore market is the world’s second largest and accounts for 9 percent of global stock value, but has been rejected for index inclusion three times by MSCI over issues including capital controls and long trading halts. MSCI’s decision is expected after the close of US markets.
Japan’s Topix rose 0.7 percent to the highest since August 2015 amid weakness in the yen. Hong Kong equities retreated ahead of MSCI Inc.’s decision on whether to include China’s domestic equities in benchmark indexes.
The Stoxx Europe 600 increased 0.2 percent as of 9:52 a.m. in London. The UK’s FTSE 100 Index climbed 0.3 percent. Futures on the S&P 500 Index rose less than 0.1 percent. The underlying gauge added 0.8 percent Monday as tech and health-care shares climbed.
The British pound fell 0.3 percent to $1.2695, erasing an earlier gain. The euro edged 0.1 percent higher to $1.1155. The Bloomberg Dollar Spot Index was little changed, after advancing 0.4 percent on Monday.
The measure touched the lowest level since October last week. The yen fell 0.1 percent to 111.61 per dollar. The currency retreated 0.6 percent on Monday.
The yield on 10-year Treasuries dropped one basis point to 2.18 percent, after rising four basis points Monday. Benchmark yields in the UK fell three basis points.
West Texas oil rose 0.3 percent to $44.32 a barrel, after settling at the lowest level since November on Monday. Investors are weighing a forecast decline in US crude stockpiles against a revival in output from Libya. Gold climbed 0.3 percent to $1,246.96 an ounce, after closing Monday at the lowest in more than a month.