'Flash crash' rocks pound as US jobs dampen rate talk

New York (AFP) - A dizzying "flash crash" of the British pound sent shockwaves across global markets already hyper-sensitive to Brexit issues on Friday and raised fresh questions about the power of thinly-regulated program trading.

Meanwhile, the much-awaited US jobs report for September, expected to underline the case for a Federal Reserve rate rise, underwhelmed, leaving the rate question unresolved.

In a still-unexplained move, the pound plunged more than six percent against the dollar within minutes in Asian trading hours.

The currency fell off a cliff at about 2310 GMT on Thursday to strike a 31-year low at $1.1841, before rebounding back above $1.2439.

The euro also hit a six-and-a-half-year high against sterling at 94.15 pence.

At 2100 GMT Friday, it was at $1.2439, and at 90.01 pence on the euro.

- 'Technical factors'? -

Britain's finance minister Philip Hammond downplayed the flash crash, blaming "technical factors" in the market.

"Markets will go up and down -- markets respond to noises."

But Bank of England Governor Mark Carney asked the Bank for International Settlements to look into cause.

The pound's plunge capped a tumultuous week of increasing market nervousness over Britain's planned pullout from European Union, which could deeply affect existing trade and finance relations and slow regional growth.

British Prime Minister Theresa May said last weekend that she would trigger the process for Britain's departure from the EU by the end of March.

That ignited a new round of verbal jousting over the terms of the breakup. French President Francois Hollande said Thursday that the EU should take a tough line with London during exit talks to prevent the breakup of the bloc.

- Pound now a 'political' currency -

Analysts saw Brexit at the root of the currency's plummet HSBC Bank's David Bloom said the pound had become a "political and structural currency."

"The currency is now the de facto official opposition to the government's policies," he said in a note to investors.

And Berenberg bank analysts said the risks for the pound were "heavily tilted to the downside" and its path would be determined by "the noise about and the substance of" the Brexit negotiations.

The sterling had mostly settled by the time European markets opened, and London ended closing with a 0.6 percent gain as the weak pound boosted exporters.

Frankfurt and Paris, however, both ended the week in the red, both off 0.7 percent for the day Friday.

US stocks showed modest losses after the September jobs report showed 156,000 positions added, below the 170-180,000 expected.

Analysts said the data indicated the US labor market remained robust, and some said it backed the Federal Reserve's path for a rate rise by year's end.

"Today's report leaves the Fed on track for a December rate hike," Unicredit's Harm Bandholz said in a note to investors.

But Jack Ablin of BMO Private Bank said things were not so certain. "It allows the Fed reserve to continue to keep their current program in place and mull over data, and we expect higher rates later on," he said.

For Hugh Johnson of Hugh Johnson Advisors, the Fed rate rise is mostly already baked into prices.

"There's some caution because the most important factor affecting the stock market now is earnings," he said.

And with the economy seeming to be growing at "a slow and unimpressive and in some way unsatisfactory pace," he said, the question over how that could be expected to power an earnings turnaround.

- Key figures around 2100 GMT -

New York - DOW: DOWN: 0.2 percent to 18,240.49 (close)

New York - S&P 500: DOWN: 0.3 percent to 2,153.74 (close)

New York - Nasdaq: DOWN: 0.3 percent to 5,292.40 (close)

London - FTSE 100: UP 0.6 percent at 7,044.39 (close)

Frankfurt - DAX 30: DOWN 0.7 percent at 10,490.86 (close)

Paris - CAC 40: DOWN 0.7 percent at 4,449.91(close)

EURO STOXX 50: DOWN 0.6 percent at 3,002.57 (close)

Tokyo - Nikkei 225: DOWN 0.2 percent at 16,860.09 (close)

Hong Kong - Hang Seng: DOWN 0.4 percent at 23,851.82 (close)

Pound/dollar: DOWN at $1.2435 from $1.2614

Euro/pound: UP at 90.01 pence from 88.42 pence

Euro/dollar: UP at $1.1196 from $1.1153

Dollar/yen: DOWN at 102.93 yen from 103.95 yen

Oil - West Texas Intermediate: DOWN 63 cents at $49.81 per barrel

Oil - Brent North Sea: DOWN 58 cents at $51.93