BLBG: Pound Drops, Gilts Advance on Falling Stocks, Bank Job Outlook
The pound fell against the dollar for a fourth day and gilts rose as equities dropped and an industry group said financial-services companies may eliminate as many as 15,000 jobs in the second quarter.
Sterling also slipped versus the euro as leaders of advanced and emerging economies prepared to meet to discuss a global approach to financial regulation at the Group of 20 summit in London on April 2. Today’s decline versus the dollar put the pound on course for its third straight quarterly loss, the longest stretch of decline since December 2005.
“The pound is going to suffer given the negative global news,” said Ian Stannard, a senior currency strategist at BNP Paribas SA in London. “The increasing likelihood that we might not get anything significant out of the G-20 is going to weigh on equity markets and the pound too. Sterling could well be the underperformer of the week.”
Sterling dropped 1 percent to $1.4171 at 12:19 p.m. in London, after slumping to $1.4111, the lowest level since March 18. Sterling is down 3 percent against the dollar since the end of December. The British currency weakened 0.2 percent to 93 pence per euro. The pound may drop to $1.36 against the dollar this week, Stannard said.
Stock markets in Europe and Asia retreated, and U.S. equity-index futures declined.
The benchmark FTSE 100 Index declined 2.2 percent, with bank stocks including Barclays Plc and HSBC Holdings Plc falling. Barclays slid 9.7 percent as Societe Generale SA said the government may end up owning as much as 67 percent of the lender and recommended selling the shares.
Financial Job Cuts
U.K. financial-services companies may cut 1.4 percent of the industry’s workforce in the second quarter as business confidence declines further, the Confederation of British Industry said in a report based on a quarterly survey of financial companies. U.S. Treasury Secretary Timothy Geithner said yesterday on the ABC News program “This Week” that some financial firms will need “large amounts” of government aid.
Bonds gained as the Bank of England planned to buy 2.5 billion pounds ($3.5 billion) of gilts today as part of its quantitative-easing plan to reduce borrowing costs and revive the economy. The Federal Reserve plans to buy up to $300 billion of U.S. government debt over the next six months to cap borrowing costs and stimulate the economy.
“We expect the Bank of England’s and Federal Reserve’s purchases of government bonds to be supportive,” UniCredit Markets & Investment Banking analysts led by Munich-based Thorsten Weinelt wrote in a note to clients today.
The yield on the 10-year gilt fell 10 basis points, or 0.10 percentage point, to 3.19 percent. The 4.5 percent security due in March 2019 gained 0.85, or 8.5 pounds per 1,000-pound face amount, to 111.10. The two-year note yield decreased 10 basis points to 1.20 percent. Bond yields move inversely to prices.
