Pound Drops, Gilts Advance on Falling Stocks, Bank Job Losses

By Kim-Mai Cutler

March 30 (Bloomberg) -- The U.K. pound fell against the dollar for the fourth consecutive day and gilts rose as equities dropped and an industry group said financial-services companies may eliminate as many as 15,000 jobs in the second quarter.

The pound also slipped versus the euro as leaders of advanced and emerging economies prepared to meet to discuss a global approach to financial regulation at the Group of 20 summit in London on April 2. Today’s decline versus the dollar put the pound on course for its third straight quarterly loss. Stock markets in Europe and Asia retreated and U.S. equity futures declined.

“The pound is going to suffer given the negative global news,” said Ian Stannard, a senior currency strategist in London at BNP Paribas SA. “The increasing likelihood that we might not get anything significant out of the G-20 is going to weigh on equity markets and the pound too. Sterling could well be the underperformer of the week.”

The pound dropped 1.2 percent to $1.4149 by 9:11 a.m. in London, after slumping to $1.4131, the lowest level since March 18. Sterling is down 3.1 percent against the dollar since the end of December. The British currency weakened 0.4 percent to 93.19 pence per euro. The pound may drop to $1.36 against the dollar this week, Stannard said.

The benchmark FTSE 100 Index of equities declined 2.5 percent, with bank stocks including Barclays Plc and HSBC Holdings Plc lower.

U.K. financial-services companies may cut 1.4 percent of the industry’s workforce in the period as business confidence declines further, the Confederation of British Industry said. U.S. Treasury Secretary Timothy Geithner said yesterday on the ABC News program “This Week” that some financial institutions will need “large amounts” of government aid.

The yield on the 10-year gilt fell seven basis points to 3.21 percent. The 4.5 percent security due March 2019 gained 0.66, or 6.6 pounds per 1,000-pound face amount, to 110.88.

The two-year note yield declined seven basis points to 1.22 percent. Bond yields move inversely to prices.

The Bank of England said it will buy 2.5 billion pounds of gilts today as part of its so-called quantitative easing plan to reduce borrowing costs and revive the economy.

To contact the reporter on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net