Markets wrap: Stocks meander in holiday-hit trading; pound rises

Global stocks were mixed, the dollar traded sideways and the euro slipped amid thin trading Monday.

With markets in the U.K., U.S. and China all closed for public holidays, volumes were depressed across the board and many moves muted. The British pound posted the biggest gain among G-10 currencies as it recouped some of Friday’s plunge, which was triggered by polls showing the coming election may be closer than expected. South Africa’s rand reversed a rally after President Jacob Zuma survived a bid by some members of his party to oust him. Italian assets fell as a former prime minister raised the prospect of an early election.

Beyond local politics, the key challenge for investors remains gauging the ability of the world’s economy to withstand rising borrowing costs. Despite the record highs posted by global equities, an ongoing bond rally suggests traders are cautious. In a speech in Singapore earlier on Monday, Federal Reserve Bank of San Francisco President John Williams reaffirmed his view that a total of three interest-rate increases makes sense for the world’s biggest economy this year.

“The U.S. economy is about as close to the Fed’s dual-mandate goals as we’ve ever been,” Williams said. “With the attainment of our dual-mandate goals close at hand, it’s more important than ever for monetary policy to work toward what I like to call a ‘Goldilocks economy’ – an economy that doesn’t run too hot or too cold.”