The pound hovered near three-month lows versus the dollar on Tuesday and stocks were mostly weaker as investors waited for British Prime Minister Theresa May to lay out plans to exit the European Union amid fears Britain will lose access to the single market.
Safe-havens such as the yen, gold and Treasuries gained in turn.
Speadbetters forecast a slightly lower open for Britain’s FTSE, Germany’s DAX and France’s CAC.
According to her office, May will say in a speech later in the day that Britain will not seek a Brexit deal that leaves it “half in, half out” of the EU. She is due to set out her 12 priorities for upcoming divorce talks with the bloc.
Those priorities will include leaving the EU’s single market and regaining full control of Britain’s borders, media reported, reinforcing fears of a ‘Hard Brexit’ which has pushed the pound to some of the lowest levels against the U.S. dollar in more than three decades and weighed on other riskier assets.
Sterling hovered around $1.2070, in striking distance of $1.1983, its lowest since Oct. 7 struck the previous day.
Growing uncertainty over the policies of Donald Trump have also hurt equities, which had rallied in many parts of the world thanks to speculation that the U.S. President-elect would enact bold stimulus and reflationary measures once in office.
“Markets affected by the twin political black swans of 2016 – the Brexit vote and Trump win – remain volatile and uncertain,” wrote David Croy, senior rates strategist at ANZ.
U.S. stock futures dipped 0.3 percent. Wall Street was closed on Monday for Martin Luther King Day.
Japan’s Nikkei brushed a five-week low and was last down 1.5 percent. Australia and Shanghai also suffered losses, but MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.4 percent.
“Europe is going to be dominating the headlines today, and the focus is justifiably on May’s speech, and also on the interviews that Trump gave to European newspapers,” said Stefan Worrall, director of Japan equity sales at Credit Suisse in Tokyo.
The euro nudged up 0.3 percent to $1.0642 to pare most of its overnight losses.
The yen benefited from its safe-haven status, gaining versus the dollar, euro and sterling.
The dollar was down 0.3 percent at 113.790 yen having gone as low as 113.610 the previous day, its weakest since Dec. 8. The greenback also pulled back against the Swiss franc, another currency sought out when risk sentiment sours.
The Australian dollar was up 0.3 percent at $0.7499 , inching back towards a one-month high of $0.7519 reached last week on the back of higher iron ore prices.
Gold was helped by the heightened risk aversion stemming from Brexit and uncertainty over Trump’s plans.
Spot gold was $1,206.70 an ounce after climbing to $1,207.86 overnight, its highest since late November.
Crude oil was higher as Saudi Arabia’s steady commitment to reduce production offset a report forecasting U.S. output would rise again this year.
U.S. crude was up 0.2 percent at $52.46 a barrel.
Elsewhere, the price of U.S. Treasuries rose, taking the yield on the benchmark 10-year note down by about 2 basis points.