Investors turn wary as Brexit, Trump uncertainty grows

Mon Jan 16, 2017 10:52am EST
 
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By Nigel Stephenson

LONDON (Reuters) - Investors sold sterling and stocks on Monday, seeking shelter in gold and the Japanese yen as uncertainty over Britain's departure from the European Union and the policies of U.S. President-elect Donald Trump curbed appetite for risky assets.

U.S. markets were closed for the Martin Luther King Day holiday, crimping market activity and potentially exacerbating price moves.

The dollar .DXY rose, except against the yen, rebounding after suffering its worst week since November last week, when it was hit by a lack of clarity over what Trump, whose inauguration is on Friday, will do once he assumes office.

The price of gold, a frequently sought haven for investors in uncertain times, hit its highest level since November.

"The market is taking a reality check from Trump euphoria, equity markets are moving sideways, the dollar has steadied and bond yields are down, allowing gold to recover," Julius Baer commodities analyst Carsten Menke said.

Yields on low-risk German government bonds fell, but those on Italian equivalents edged up after rating agency DBRS cut Italy's credit rating late on Friday, a move that could raise borrowing costs for the country's banks.

But the eye-catching mover was Britain's pound, a day before a speech by British Prime Minister Theresa May. Media reported that she would lay out an exit from the EU that would see Britain lose access to the bloc's single market.

The pound GBP=D4 fell as low as $1.1983 in thin early Asian trade, which, barring a sudden "flash crash" in October, was its weakest against the dollar in 32 years.   Continued...

 
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