Markets were looking a little dazed and confused on Friday. Traders have been left reeling from a historic flash crash in the British pound.
A weaker pound continues to be a positive for UK equities, which were flirting with record highs. But the size of the drop in currency markets was not mirrored in the rise in the FTSE 100. The benefits of a weaker pound for exports and higher inflation are being offset by a concern the exchange rate’s decline has become destabilising.
Equity indices in the Eurozone, which don’t reap the currency benefits of a devalued British pound were showing caution, down slightly, ahead of this afternoon’s US jobs data.
The British pound’s flash crash has shaped the winners and losers on the FTSE 100. Multinationals including miners and firms with large overseas sales, which benefit from a weak pound were on top. On the back of Easyjet’s profit warning, airlines were caught the brunt of the selling of equities which lose out from a weaker domestic currency. Homebuilders, the sector probably most exposed to Brexit concerns were also lower.
US stocks look set for a narrowly lower start as overnight currency moves add to caution ahead of the release of September’s unemployment figures. Markets are also keeping a firm eye on Hurricane Mathew which has struck the East Coast of the US in Florida. Sunday’s second US presidential debate stands to be a potential source of volatility which markets will need to position for on Friday.
USA pre-opening levels
S&P 500: 1 point lower at 2,159
Dow Jones: 6 points lower at 18,262
Nasdaq 100: 5 points lower at 4,868
"DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. "