An investor looks at an electronic board showing stock information on the first trading day after the New Year holiday at a brokerage house in Shanghai, China. -Reuters
Risky assets hit the skids on Tuesday, with stocks and sterling tumbling over political uncertainty over Britain's future ties with the European Union and the policies of the incoming U.S. president, Donald Trump. European stock markets opened broadly lower , with the exception of Britain's blue-chip FTSE stock index .FTSE, which hit a fresh record high on the back of sterling's fall to multi-week lows -- seen as beneficial to exporters.
The British currency hit a 10-week low against the dollar GBP= and an eight-week low against the euro EURGBP=, under the cosh for a second day after weekend comments by British Prime Minister Theresa May that she was not interested in Britain keeping "bits" of its EU membership. A revival in worries that Britain could be headed for a "hard Brexit", in which it chooses to take full control of immigration and give up access to the single market, reverberated across financial markets, lifting demand for safe-haven assets such as German government bonds DE10YT=TWEB and gold XAU=, which rose to its highest level in over a month. A near 4-percent slide in oil prices on Monday also tempered risk appetite, while caution was also setting in ahead of a news conference on Wednesday by Trump, his first since winning the election.
On Monday, declines in energy and financial stocks weighed on the S&P 500 and helped stall the Dow's pursuit of the 20,000 milestone ahead of earnings season and expected U.S. policy changes under Trump. "The market has high expectations for Trump's economic policy; perhaps they are booking profits just in case he throws in a curve-ball at tomorrow's much anticipated press conference," said City Index research director Kathleen Brooks.