European shares dip, sterling falls on
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[January 09, 2017]
By Nigel Stephenson
LONDON (Reuters) - The dollar edged higher
on Monday, boosted by robust U.S. wage growth data strengthening the
case for more Federal Reserve interest rate increases, while Britain's
pound fell on Prime Minister Theresa May's hint at no membership of the
EU's single market.
Britain's blue-chip FTSE 100 index <.FTSE> nonetheless hit a record high
as the first full trading week of 2017 on London markets began. The
pan-European STOXX 600 index <.STOXX> dropped 0.4 percent in early
Britain's pound was the big mover on currency markets, falling against
the dollar and the euro, in reaction to weekend comments from May that
were interpreted as suggesting the country could face a "hard Brexit"
without access to the single market when it leaves the European Union.
"The rise in the FTSE is really down to the weakness in sterling, but
the Brexit news is not great so I don't see the FTSE gaining too much,"
said Ipek Ozkardeskaya, market strategist at London Capital Group.
In Asia, MSCI's ex-Japan Asia-Pacific shares index <.MIAPJ0000PUS> was
flat on the day, having risen as much as 0.5 percent after posting a
rare loss in the previous session. Australia's S&P/ASX200 <.AXJO> rose
0.9 percent while Hong Kong shares <.HSI> rose 0.2 percent.
Trading was light because Japan is shut for a holiday.
A focus for the week will be a news conference on Wednesday at which
U.S. President-elect Donald Trump may give more details of his policies
before his Jan. 20 inauguration.
Expectations of more economic stimulus from a Trump administration have
helped push U.S, stocks and bond yields higher since his victory in the
Nov. 8 election.
The Dow Jones Industrial Average <.DJI> came within one point of the
20,000 mark for the first time on Friday while the S&P 500 <.SPX> and
Nasdaq <.IXIC> hit record highs.
Friday's closely-watched U.S. employment report showed fewer jobs than
forecast were created last month, although a rebound in wages indicated
economic strength and set the stage for more Fed hikes later in the
The dollar index <.DXY>, which measures the greenback against a basket
of currencies, was just about in positive territory. The euro <EUR=>
rose 0.1 percent to $1.0544 while the yen <EUR=> fell 0.3 percent to
117.21 per dollar.
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A worker shelters from the rain under a Union Flag umbrella as he
passes the London Stock Exchange in London, Britain, October 1,
2008. REUTERS/Toby Melville/File Photo
Sterling <GBP=D4> fell 0.9 percent to 1.2172, having touched it
slowest since late October at $1.2163, and dropped more than 1
percent against the euro <EURGBP=> to an eight-week low of 85.65
This followed comments from May that she was not interested in
keeping "bits of membership" of the European Union when the country
leaves the bloc.
"Since October it's become clear that sterling has a very binary
relationship with political news, and anything which suggests a
'hard Brexit' sends sterling down, and anything that suggests a
'soft Brexit' sends sterling up. Thatís been the case since the
party conference in October," said Rabobank currency strategist Jane
German 10-year government bond yields <DE10YT=TWEB>, the benchmark
for euro zone borrowing costs, last stood at 0.29 percent, down 0.5
basis points on the day.
It earlier rose close to 0.33 percent, its highest since Dec. 19,
after data showed German exports rose 3.9 percent in November, their
strongest monthly gain since May 2012 and far ahead of forecast.
Oil prices fell on a surge in Iranian exportsand as U.S. producers
added more rigs.
Brent crude <LCOc1>, the international benchmark, last traded at
$56.68 a barrel, down 43 cents.
(Additional reporting by Saikat Chatterjee in Hong Kong, Jemima
Kelly and Dhara Ranasinghe in London Editing by Jeremy Gaunt.)
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