European Stocks Gain; Pound Hit by Brexit Discord: Markets Wrap

European stocks climbed as analysts speculated the market could be relatively resilient to the tech-led downdraft in the U.S. The pound weakened on concern the U.K. is inching closer to a no-deal Brexit.

The Europe Stoxx 600 rose Monday with broad gains across industry groups. Oil slumped on a price reduction by Saudi Arabia. The dollar strengthened while Treasury yields were little changed. Gold fell.

Stock futures pointed to further losses for American shares when markets re-open on Tuesday after the Labor Day holiday as Nasdaq futures slid 0.8%. Valuation is emerging as a concern for U.S. investors and there’s also nervousness about extreme positions in technology stocks.

Global equities fell the most since June last week as doubt crept into investors minds about whether equities have risen too quickly and valuations are reaching extremes.

U.S. technology shares, which have seen a powerful rally through the depths of the pandemic, showed signs of buckling at the end of the week amid reports that huge options bets were fanning their gains. The downturn embroiled SoftBank Group Corp., which slumped 7% after reports that the Japanese conglomerate made massive bets on tech-linked options trades.

“I don’t think this is a start of a downturn in asset prices,” said Robert Greil, chief strategist at Merck Finck Privatbankiers AG in Munich. “We’re only in the first phase of the economic recovery, which makes a major downturn unlikely. Naturally, setbacks are buying opportunities in such an environment.”

Meanwhile, the pound fell to $1.3168, extending its drop to the longest since June as the prospects of a trade accord with the European Union looked increasingly remote. U.K. Prime Minister Boris Johnson will tell the EU on Monday he’s willing to walk away rather than compromise on what he sees as the core principles of Brexit, setting an Oct. 15 deadline for an agreement.

Here are some key events coming up:

• The next Brexit negotiating round begins with face-to-face discussions between the U.K. and the EU in London.
• The ECB will probably hold rates on Thursday but indicate that downside risks have intensified, suggesting further easing is possible before year-end.
• U.S. CPI data is due Friday, with consumer prices expected to rise in August for a third straight month.

These are the main moves in markets:

Stocks

• Futures on the S&P 500 Index were little changed at 8:35 a.m. New York time.
• Nasdaq futures dropped 0.8%.
• The Stoxx Europe 600 Index climbed 1.5%.
• The MSCI Asia Pacific Index declined 0.3%.
• The MSCI Emerging Market Index fell 0.5%.

Currencies

• The Bloomberg Dollar Spot Index increased 0.3%.
• The euro decreased 0.1% to $1.1821.
• The British pound dropped 0.8% to $1.3168.
• The Japanese yen was little changed at 106.20 per dollar.

Bonds

• The yield on 10-year Treasuries was unchanged at 0.72%.
• Germany’s 10-year yield fell one basis point to -0.48%.
• Britain’s 10-year yield sank two basis points to 0.247%.
• Japan’s 10-year yield gained one basis point to 0.047%.

Commodities

• West Texas Intermediate crude fell 1.7% to $39.10 a barrel.
• Gold weakened 0.2% to $1,930.17 an ounce.
• Brent crude dropped 1.8% to $41.89 a barrel.

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