LONDON: The pound hit a record low against the dollar on Monday on growing fears over Britain’s struggling economy.
Stock markets mostly extended losses and oil prices fell further after last week’s routs that were triggered by growing prospects of a global recession.
However, Italy’s stock market rose as markets weighed Italy’s future political landscape after Eurosceptic populists swept to victory in the general election of eurozone members.
“The pound crash shows that markets lack confidence in the UK and its financial strength is under siege,” said Jessica Amir of Saxo Capital Markets.
“The pound is a hair’s breadth away from parity (of the dollar) and it’s only going to get worse from here.”
Economists have expressed concern that last week’s huge tax-cutting budget from new Prime Minister Liz Truss’ government – aimed at helping the recession-threatened economy – could actually trigger massive borrowing and further fuel inflation.
The pound hit an all-time low of $1.0350 on Monday, days after Britain’s new finance minister Kwasi Kwarteng’s inflation-fighting budget.
The pound has struggled in recent years as the UK failed to reach major trade deals after leaving the European Union.
European stocks falter after inflation rout
Ahead of Monday’s crash, the pound suffered a series of 37-year lows against the greenback this month on UK recession fears fueled by soaring inflation.
The euro has also come under heavy selling pressure against the dollar in recent months, with the Federal Reserve raising interest rates more aggressively than the European Central Bank.
On Monday’s stock market, Milan’s FTSE MIB rose 0.5% to 21,174.60 points.
However, the Euro hit a new 20-year low at $0.9554.
“Italy is clearly outperforming after the election result,” noted Craig Erlam, analyst at Oanda trading group.
“Time will tell how successful the new government will be, but the prospect of some political stability appears to be generating a small rally of relief today.”
Italy has taken a sharp turn to the right after the populist Eurosceptic party of Giorgia Meloni won the weekend general election, putting a former Mussolini admirer on track to become the first woman to lead the country.
Meloni’s Brothers of Italy party, which has neo-fascist roots, won 26% of Sunday’s election, partial results showed.
He leads a coalition poised to win a majority in parliament.
Elsewhere, the Moscow stock market plunged 10% to its lowest level since Russia launched its offensive against Ukraine seven months ago, as tensions rose across the country over a military mobilization partial.
The ruble-denominated benchmark Moex fell 10.2% to 1,873.55 points in the early afternoon, falling below 1,900 points for the first time since the invasion of the neighboring Ukraine in February.
Key figures around 12:15 GMT
Pound/dollar: DOWN to $1.0721 from $1.0852 on Friday
Euro/dollar: DOWN at $0.9645 against $0.9695
Euro/pound: UP at 89.93 pence against 89.28 pence
Dollar/yen: UP to 144.30 yen from 143.31 yen
London – FTSE 100: 0.7% drop to 6,969.77 points
Frankfurt – DAX: 0.1% drop to 12,273.63%
Paris – CAC 40: DOWN 0.1% to 5,777.09
EURO STOXX 50: DOWN 0.1% to 3,346.93
Tokyo – Nikkei 225: 2.7% decline to 26,431.55 (closing)
Hong Kong – Hang Seng Index: DOWN 0.4% to 17,855.14 (close)
Shanghai – Composite: DOWN 1.2% to 3,051.23 (close)
New York – Dow: DOWN 1.6% to 29,590.41 (closing)
West Texas Intermediate: 1.0% drop to $77.98 a barrel
North Sea Brent: 1.1% drop to $85.17 a barrel