Boeing and Brexit vied for attention on global financial markets, as sterling slumped as the political woes of UK prime minister Theresa May appeared to deepen, while the planemaker’s shares came under renewed pressure after countries closed airspace to the 737 Max.
The twin dramas largely overshadowed an unexpectedly weak US inflation reading that bolstered equities on speculation the US Federal Reserve has room to stay patient on rate hikes.
Boeing’s two-day rout topped 11% at one stage when European aviation authorities banned the troubled aircraft. In Oslo, shares in Norwegian Air, which uses many of the Boeing aircraft under scrutiny, fell almost 3%.
“I expect equity markets to remain volatile and to tread water, and there is still too much risk in risk assets, and ultimately I think bond yields will head lower but this is a process that unfolds, it’s not a sudden event,” said Suzanne Hutchins, a senior portfolio manager at Newton Investment Management in London.
The pound whipsawed amid the Brexit drama in Westminster, rising overnight after Ms May won a new deal to leave the EU. It tumbled as much as 1.1% against the dollar after UK attorney general Geoffrey Cox said the risks for Britain surrounding the Irish backstop were unchanged. The pound also fell sharply against the euro, falling by 1% to 86.33 pence.
The export-heavy Ftse-100 rose as sterling dropped. UK banks with a big British domestic focus and housebuilders, considered to be vulnerable to economic hits stemming from Brexit, were among the best performers on the index. Shares in Barclays and RBS rose but their gains were pared as the session drew on and UK homebuilders Persimmon and Taylor Wimpey were also higher. There was a similar story with Irish shares. AIB rose almost 3% and shares in Bank of Ireland, which is the most exposed of the Irish lenders to a weak sterling, gained 2%.
Crude rallied to the highest in more than a week as traders remained optimistic over Saudi Arabia’s planned production cuts and amid a weaker dollar. Brent added 27 cents to $66.85 a barrel. Saudi Arabia’s commitment to Opec’s deal to reduce output supported prices, with the producer said to be planning to supply customers with less oil than requested in April. Meanwhile, a weaker dollar bolstered the appeal of commodities traded in the US currency, such as oil.
“The Saudis are not going to relent on cutting production. They’re on a mission to get prices back up to $80 a barrel,” said Phil Flynn, senior market analyst at Price Futures Group Inc in Chicago.