London: The pound hit a record low against the dollar Monday on surging fears about the ailing UK economy. Stock markets mostly extended losses and oil prices fell further after last week’s routs that were triggered by growing prospects of a global recession.
However, the Italian stock market climbed as markets assessed Italy’s future political landscape after Eurosceptic populists swept to victory in the eurozone member’s general election. “The pound’s crash is showing markets have a lack of confidence in the UK and that its financial strength is under siege,” said Jessica Amir at Saxo Capital Markets.
“The pound is a whisker away from (dollar) parity and the situation is going to only worsen from here.” Economists expressed concerns that last week’s huge tax-cutting budget from the government of new Prime Minister Liz Truss — aimed at helping the recession-threatened economy — could actually spark massive borrowing and further fuel inflation. The pound on Monday struck an all-time low at $1.0350, days after new UK finance minister Kwasi Kwarteng’s inflation-fighting budget.
Sterling has struggled in recent years as the UK fails to strike major trade deals following its exit from the European Union. Prior to Monday’s crash, the pound suffered a series of 37-year lows against the greenback this month on UK recession fears propelled by sky-high inflation. The euro has additionally come under heavy selling pressure against the dollar in recent months, as the Federal Reserve hikes interest rates more aggressively than the European Central Bank.
– Italian stocks –
In stock market trading Monday, Milan’s FTSE MIB rose 0.5 percent to 21,174.60 points. However the euro struck a new 20-year low at $0.9554. “Italy is clearly outperforming following the election result,” noted Craig Erlam, analyst at Oanda trading group. “Time will tell how successful the new government will prove to be but the prospect of some political stability appears to be generating a small relief rally today.”
Italy took a sharp turn to the right after Giorgia Meloni’s Eurosceptic populist party swept to victory in a weekend general election, putting a one-time Mussolini admirer on course to become the first woman to lead the country. Meloni’s Brothers of Italy party, which has neo-fascist roots, won 26 percent in Sunday’s election, according to partial results. It leads a coalition set to win a majority in parliament. Elsewhere, the Moscow stock exchange plunged 10 percent to its lowest point since Russia began its Ukraine offensive seven months ago as tensions grew across the country over partial military mobilisation. The benchmark ruble-denominated Moex index sank 10.2 percent to 1,873.55 points in early afternoon trading, dropping below the 1,900 points mark for the first time since the February invasion of neighbouring Ukraine. – Key figures at around 1215 GMT – Pound/dollar: DOWN at $1.0721 from $1.0852 on Friday Euro/dollar: DOWN at $0.9645 from $0.9695 Euro/pound: UP at 89.93 pence from 89.28 pence Dollar/yen: UP at 144.30 yen from 143.31 yen London – FTSE 100: DOWN 0.7 percent at 6,969.77 points Frankfurt – DAX: DOWN 0.1 percent at 12,273.63 Paris – CAC 40: DOWN 0.1 percent at 5,777.09 EURO STOXX 50: DOWN 0.1 percent at 3,346.93 Tokyo – Nikkei 225: DOWN 2.7 percent at 26,431.55 (close) Hong Kong – Hang Seng Index: DOWN 0.4 percent at 17,855.14 (close) Shanghai – Composite: DOWN 1.2 percent at 3,051.23 (close) New York – Dow: DOWN 1.6 percent at 29,590.41 (close) West Texas Intermediate: DOWN 1.0 percent at $77.98 per barrel Brent North Sea crude: DOWN 1.1 percent at $85.17 per barrel burs
