Pound slides on fears over May's future

Madame Tussauds unveiled their new wax model of Britain's Prime Minister Theresa May in London. Photo: Reuters / Dylan Martinez

NEW YORK - Global stocks opened the week with a bout of unease on Monday as European stocks drifted downwards and Wall Street narrowly eked out a positive finish amid fears over the long-awaited corporate tax cuts.

Meanwhile, the British pound sank on uncertainty surrounding Prime Minister Theresa May's political future, dealers said.

The pressure on sterling came after reports that dozens of MPs in the ruling Conservative Party were backing a move to oust May, whose leadership has been battered by scandals and crises.

In New York, the major indices finished essentially flat, ending a two-day losing streak but showing the bullish attitudes have dimmed as complications mount in Republican efforts to enact a sweeping tax overhaul eagerly anticipated by Wall Street.

"I don't think investors are expecting a lot from this Congress," Maris Ogg of Tower Bridge Advisors told AFP. "I don't think we're going to get tax reform."

Market players got a bit of a boost from news the Senate Banking Committee reached a bipartisan agreement to ease the regulatory burdens on smaller community banks.

But investors also soured on a restructuring plan unveiled by embattled industrial giant General Electric, which cut dividends in half. The company's stock nosedived more than seven percent to its lowest price in more than five years.

A weakened British premier

The pound fell as far as $1.3062 in the European morning -- dangerously close to the $1.3050 level that pessimists believe would trigger a sustained sell-off. But the currency managed to claw back some of its losses by the end of the day.

London's benchmark FTSE 100 index of blue-chip firms got an early boost from the weaker pound, seen to be positive for multinationals, but eventually joined Europe's downward drift, losing 0.2 percent.

Frankfurt and Paris finished down 0.4 percent and 0.7 percent, respectively.

London is under pressure to meet a two-week deadline set Friday by the EU's chief Brexit negotiator Michel Barnier for a deal on exit terms ahead of a December EU summit.

"Clearly the Brexit negotiations are at a crucial juncture," noted Rabobank analyst Jane Foley. "However, without a majority, May's leadership has been weakened and she appears unable to rally her cabinet behind her."

In recent weeks, many major world markets have surged -- with Wall Street hitting several records and Tokyo touching a 26-year high -- on optimism about the global economy and a series of strong corporate earnings.

But investors have started to cash in as worries begin to emerge about high share valuations and the fate of the US tax cuts.

AFP

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