Unlock Premium Data: Up to 50% Off InvestingProCLAIM SALE

Shares sapped by tech problems and Brexit snags

Published 10/23/2019, 07:34 AM
© Reuters. FILE PHOTO: A trader works as a screen shows market data behind him in London

By Marc Jones

LONDON (Reuters) - World stock markets struggled on Wednesday, as hopes faded that a Brexit deal would be wrapped by next week and a profit warning from Texas Instruments pulled down technology shares.

It was hard to pick which was weighing on sentiment more in European trading. The pound was yanked down to $1.2850 from $1.30 after UK lawmakers put the brakes on the government's Brexit plans again on Tuesday.

Meanwhile, Europe's tech sector (SX8P) fell as much as 1.4% as STMicroelectronics (MI:STM), Dialog Semiconductor (DE:DLGS) and Infineon (DE:IFXGn) all dropped after Texas Instruments slumped 10% (O:TXN) in after-hours Wall Street trading. (EU)

Major Asian chipmakers, including Taiwan's TSMC (TW:2330) and South Korea's SK Hynix (KS:000660), had fallen overnight too on worries the industry was being squeezed both by a downturn in global demand and by the U.S.-China trade war.

"When there are tensions in trade and obstacles to trade, what do businesses do? They become more cautious. And they pull back," Rafael Lizardi, Texas Instruments' chief financial officer, said after the company's results.

With investors seeking out safer assets again, the Japanese yen climbed to a one-week high of 108.25 per dollar and the Swiss franc gained early in Europe.

Adam Cole, a strategist at RBC Capital Markets, said Brexit was driving a "general risk-off tone." Others pointed to the growing likelihood British Prime Minister Boris Johnson would now push for a snap election.

"Things could change very quickly today, depending on the EU response," Cole said, referring to how much EU leaders would be prepared to extend the Brexit deadline beyond Oct. 31.

But he added he didn't see "much downside" risk for sterling now, with a no-deal Brexit off the table.

The pound has surged 4.5% this month which, if it holds the gains, will be its best month since January last year.

Receding worries about a no-deal Brexit also underpinned the euro at $1.1122 (EUR=), just below a two-month high of $1.1180, though it was also down to the dollar staying subdued before an expected third U.S. interest rate cut of the year next week.

In a mirror image of the pound and euro, October is on course to see the biggest monthly fall in the dollar index (DXY) since January 2018. It has only fallen for six of the months during that period too.


Equities on Wall Street looked set for another sluggish start. Hopes for forgetting Texas' woes were already dashed as digger giant Caterpillar (N:CAT) blamed a weak global construction market as it cut its profit forecast after a hefty 13.5% fall in third quarter profits.

In commodity markets, oil prices fell after data showed U.S. crude inventories grew more than expected last week. But prices generally held firm after China signaled hopes for progress in upcoming trade talks with the United States and OPEC and its allies considered deeper cuts in production.

© Reuters. FILE PHOTO: A trader works as a screen shows market data behind him in London

Brent crude (LCOc1) futures fell 0.52% to $59.39 a barrel. U.S. West Texas Intermediate crude (CLc1) lost 0.81% to $54.04 per barrel.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.