A close-up of a mixture of British five, ten and twenty pound notes in London last week. The pound last week slumped to a 10-month low against the dollar and three-month trough compared to the euro on fears over the impact of Scottish independence. However yesterday, the pound steadied, edging up to $1.6240 from $1.6234 late in New York on Monday.
AFP
European stock markets slid yesterday as investors looked ahead to a policy meeting of the US Federal Reserve and the looming referendum on Scottish independence.
However sterling steadied, while the euro firmed.
London’s benchmark FTSE 100 index shed 0.18% to close at 6,792.24 points, while Frankfurt’s DAX index dropped 0.28% to 9,623.93 points and in Paris the CAC 40 fell 0.44% to 4,409.15 points.
“Shares in Europe fell across the board today (Tuesday) as investors took a more defensive stance leading into tomorrow’s Fed meeting particularly given the reported weak capital flows into China and a further drop in German investor confidence,” said Jasper Lawler, an analyst at CMC Markets UK.
Investor sentiment in Europe’s biggest economy, Germany, fell for the ninth month in a row in September amid jitters about the economic fallout from global crises, a survey indicated on Tuesday.
The widely watched investor confidence index calculated by the ZEW economic institute fell by 1.7 points to 6.9 points in September, it said in a statement.
Asian stock markets slipped before the Federal Reserve’s meeting, and as lingering concerns over Chinese and US economic data weighed on global markets, dealers said.
The US central bank might adjust its timing for raising benchmark interest rates. Critics say its nearly six-year-old zero-rate policy is feeding asset bubbles and possibly inflation.
“As long as rates remain at record lows, there is reason for US indices to be at these highs,” said Erlam. “That’s why people are concerned about the Fed’s stance... after rumours surfaced that the Fed is preparing to drop its commitment to keep rates low for a considerable amount of time.”
A weak US inflation report helped soothe those concerns as the Federal Open Market Committee began Tuesday its two-day monetary policy meeting.
In midday trading, the Dow Jones Industrial Average rose 0.29% to 17,079.96 points.
The broad-based S&P 500 gained 0.46% to 1,993.20 points, while the tech-rich Nasdaq Composite Index added 0.15% to 4,525.64 points.
In Britain, 12-month inflation dipped to 1.5% in August from 1.6% in July, official data showed, easing pressure on the Bank of England to raise its record-low interest rate of 0.5%.
Attention was focused on Scotland before the country votes tomorrow on whether to split from the rest of Britain.
Polls have showed a late surge in support for independence, putting the outcome on a knife edge, after the several months of the pro-union “No” camp holding a clear lead.
“It’s the theme of uncertainty that appears to be weighing.... It remains a close race and this news clearly isn’t sufficient to placate fears in financial markets,” said Trustnet Direct analyst Tony Cross.
The British pound last week slumped to a 10-month low against the dollar and three-month trough compared to the euro on fears over the impact of Scottish independence.
However yesterday, the pound steadied, edging up to $1.6240 from $1.6234 late in New York on Monday.
The euro climbed to 79.75 pence from 79.71 pence.
The European single currency rose to $1.2954 from $1.2940 on Monday.
On the London Bullion Market, gold gained to $1,232.25 an ounce from $1,234.25.
