October 23, 2019 / 11:27 AM / 2 months ago

GLOBAL MARKETS-Shares sapped by tech problems and Brexit snags

* Brexit developments sap share rally, pound yanked off $1.30

* Texas Instruments revenue forecast hits chipmakers

* China says report of HK’s Lam being replaced has “ulterior motives”

* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

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By Marc Jones

LONDON, Oct 23 (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 fell as much as 1.4% as STMicroelectronics, Dialog Semiconductor and Infineon all dropped after Texas Instruments slumped 10% in after-hours Wall Street trading.

Major Asian chipmakers, including Taiwan’s TSMC and South Korea’s SK Hynix, 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, 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 since January 2018. It has only fallen for six of the months during that period too.

CAT WARNING

Equities on Wall Street looked set for another sluggish start. Hopes for forgetting Texas’ woes were already dashed as digger giant Caterpillar blamed a weak global contruction 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 signalled hopes for progress in upcoming trade talks with the United States and OPEC and its allies considered deeper cuts in production.

Brent crude futures fell 0.52% to $59.39 a barrel. U.S. West Texas Intermediate crude lost 0.81% to $54.04 per barrel. (Reporting by Marc Jones, editing by Larry King and Bernadette Baum)

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