The pound hovered near a month low on deepening uncertainty over Brexit. Sterling languished at $1.2214, close to its lowest since early September following reports that talks between Britain and the European Union were close to breaking down without a deal. In a telephone call yesterday, German Chancellor Angela Merkel told British Prime Minister Boris Johnson that a deal was “overwhelmingly unlikely,” a Downing Street source said. It was also reported that Johnson also faces a fresh rebellion in cabinet, with a group of ministers poised to quit due to concerns he is leading the country into a no-deal exit. The EU accused Britain of playing a “stupid blame game” following the leak while the Irish PM Leo Varadkar said that while they will work until the last moment, it will be very difficult to secure an arrangement by next week.
Asian stocks suffered their biggest fall this week as the United States and China’s dispute over trade showed tensions are not diffusing and are now weighing on the global economic growth. MSCI's Asia-Pacific shares was down 0.61%, Chinese shares fell 0.32% and reached a 5-week low. Nikkei slid 0.73%, its biggest decline in a week. Hong Kong shares fell 0.68% due to persistent worries of that often violent protests continuing in the Asian financial hub. Australian shares lost 0.76%. Euro Stoxx 50 slightly edged up 0.03% as did the German DAX while FTSE futures backtracked 0.08%. The S&P 500 ended 1.56% lower to 2,893.06, the Dow Jones Industrial Average fell 313.98 points to 26,164.04 and the Nasdaq Composite dropped to 7,823. Meanwhile in Washington, the new IMF Managing Director Kristalina Georgieva said trade tensions could mean a loss of around $700 billion to the world economy by 2020, or about 0.8% of the global GDP.
Oil prices continued their third consecutive fall this week as tensions escalated between the United States and China. U.S. industry data showed a bigger-than-expected rise in inventories which also depressed prices. Brent crude fell 24 cents to $58.00 a barrel while U.S. West Texas Intermediate was at $52.39, down 24 cents. Meanwhile, Ecuador is losing a third of its oil supply due to anti-government protests that have seriously affected oil output. An uprising in Iraq has also entered a second week, threatening output at the Organization of the Petroleum Exporting Countries’ second-largest producer. Oil prices extended declines as U.S. visa restrictions on Chinese officials and more Chinese companies being added to a U.S. trade blacklist diminished hopes of a truce at trade negotiations this week.
The dollar steadied as hopes for a breakthrough in U.S-China trade talks waned, sending investors into less risky assets. Gold added 0.8% to $1,505.47 an ounce while the safe-haven Japanese yen strengthened 0.21% versus the greenback at 107.08 per dollar. The dollar was steady at $1.0962 on the euro and flat around 99.093 against a basket of major currencies. The Chinese yuan, the most sensitive currency to the trade talks, had dropped to a one-month low in offshore trade overnight, but was a little stronger at 7.1434 per dollar in onshore trade today. The Australian and New Zealand dollars edged higher, with the Aussie rising 0.2% to $0.6741 and the kiwi 0.3% to $0.6312. The Turkish lira settled up 0.06% versus the U.S. dollar at 5.83 after falling more than 2% on Monday.