World markets fall as Brexit deal looks unlikely

London — World stock markets fell on Wednesday, as hopes faded that a Brexit deal would be wrapped up by next week and a profit warning from Texas Instruments pulled down tech shares.

It was hard to pick which was weighing on sentiment more in early European trading. The pound was yanked down to $1.2850 from $1.3000 after UK law makers put the brakes on the government’s Brexit plans again on Tuesday.

Meanwhile, Europe’s tech sector fell 1.4%. STMicroelectronics, Dialog Semiconductor and Infineon all dropped after Texas Instruments slumped 10% in after-hours Wall Street trading.

Major Asian chip makers, including Taiwan’s TSMC and South Korea’s SK Hynix, had fallen on worries the industry was being squeezed both by a downturn in global demand and by the US-China trade war.

“When there are tensions in trade and obstacles to trade, what do businesses do? They become more cautious, and they pull back,” Rafael Lizardi, Texas Instruments’ CFO, said after the company’s results.

With investors seeking out safer assets again, the yen climbed to a one-week high of ¥108.25 to the dollar and the Swiss franc gained early in Europe.

Adam Cole, a strategist at RBC Capital Markets, said Brexit was driving a “general risk-off tone”. Others pointed to the growing likelihood that UK Prime Minister Boris Johnson would now push for a snap election.

“Things could change very quickly today, depending on the EU response,” Cole said, referring to how long EU leaders would extend the October 31 Brexit deadline, but added that he didn’t see “much downside” risk for sterling now, with a no-deal Brexit off the table.

The pound has surged 4.5% this month, which, if it holds the gains, will be its best month since January last year. 

Receding worries about a no-deal Brexit also underpinned the euro at $1.1122, just below a two-month high of $1.1180. The dollar was subdued ahead of a US Federal Reserve policy meeting next week, where policymakers are expected to cut interest rates by 0.25 percentage points.

In commodity markets, oil prices fell after data showed US crude inventories grew more than expected last week. But prices generally held firm after China signaled hopes for progress in upcoming trade talks with the US and oil cartel Opec and its allies considered deeper cuts in production.

Brent crude futures fell 0.52% to $59.39 a barrel. US West Texas Intermediate (WTI) crude lost 0.81% to $54.04 per barrel.

Reuters

Source: businesslive.co.za