Stocks fall after sterling 'flash crash', U.S. jobs data

Fri Oct 7, 2016 4:37pm EDT
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By Lewis Krauskopf

NEW YORK (Reuters) - Sterling weakened again on Friday after rebounding from a stunning plunge that injected volatility across markets, while Wall Street ended lower after a weaker-than-expected U.S. jobs report which left intact expectations for a U.S. interest rate hike by year-end.

Sterling plummeted nearly 10 percent to a 31-year low in earlier trading in what traders called a "flash crash".

The Bank of England was investigating the cause of the sudden price move, but the currency had already been on track for one of its worst weeks in seven years as some national leaders called for Britain to make a "hard" exit from the European Union.

Sterling was last down 1.4 percent against the dollar at about $1.2436.

"I think it’s a warning shot from the markets to the UK about what type of potential volatility in sterling we may see down the line,” said Shahab Jalinoos, global head of FX strategy at Credit Suisse in New York.

After the U.S. jobs report, the dollar slipped 0.3 percent against a basket of currencies after rising to two-month highs. The greenback weakened 0.9 percent against the yen.

Data showed U.S. employment growth unexpectedly slowed for a third month in September and the jobless rate rose. Nonfarm payrolls rose 156,000, less than August's 167,000 gain, the Labor Department said.

After the report, traders were virtually discounting chances that the Federal Reserve would raise rates at its next meeting in November, according to the CME FedWatch website. But they saw a roughly 70 percent chance for a rate hike in December, slightly higher than bets from a day earlier.   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) as the market closes in New York, U.S., October 3, 2016.  REUTERS/Lucas Jackson