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Markets slide as Brexit concerns resurface 06-07-2016 by IFC Markets

US stocks retreated on Tuesday as concerns about negative impact for the global economy of UK’s decision to leave the European Union weighed on market sentiment. Lower oil prices also added to concerns about global economic slowdown. The dollar strengthened as euro and British Pound slipped: the live dollar index data indicating the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, rose 0.7% to 96.197. The Dow Jones industrial average slid 0.6% settling at 17840.62 led by a 2.8% drop in JP Morgan shares. The S&P 500 lost 0.7% closing at 2088.55 led by financial and energy stocks. The Nasdaq index closed 0.8% lower. Trading was thin after the Independence Day holiday as 6.8 billion shares were sold on exchanges on Tuesday compared with the daily average of 7.7 billion so far this year. Benchmark 10-year Treasury yield closed at record low of 1.367% as investors fled to safety of government bonds bidding their prices up and yields lower. Economic news was also negative: the 1% decline in factory orders in May was bigger than expected, following two straight monthly gains. Today at 13:00 CET Mortgage Applications will be released in US. At 14:30 CET May Trade balance will be published. The tentative outlook is negative for the dollar. At 15:45 CET final June Services PMI will be released. The tentative outlook is positive. At 16:00 CET June Non-Manufacturing PMI will be published, the tentative outlook is positive for the dollar. And at 20:00 CET June FOMC Meeting Minutes will be released.

European stocks fell on Tuesday as investor confidence was undermined by concerns about consequences of UK’s Brexit vote and suspension of trading by three UK property funds. The euro weakened against the dollar while British Pound fell to intraday low of $1.3051, a new 31-year record low. The Stoxx Europe 600 fell 1.7%. Financial stocks led the decliners as investors sold them off after three UK property funds halted trading because of a sharp increase in withdrawals following the UK referendum of June 23. Germany’s DAX 30 lost 1.8% settling at 9532.61, France’s CAC 40 ended 1.7% lower. UK’s FTSE 100 closed 0.4% higher after the Bank of England said it is lowering capital requirements for UK banks, cutting the so-called countercyclical capital buffer for banks to zero from 0.5%. This should allow banks to lend an extra £150 billion to British businesses and households. UK exporters were also helped by weaker Pound, which makes British products cheaper and more competitive in overseas markets. In economic news German factory orders in May were unchanged due to weaker domestic demand while foreign orders rose. Today at 10:10 CET June Retail Sales will be released in France, Germany and euro-zone.

Asian stocks are falling today on heightened worries over negative impact of Brexit vote as investors sell off the risky stocks to buy safer government bonds, driving bond yields lower. Hong Kong’s Hang Seng Index is down 1.0% while Shanghai Composite Index is 0.3% higher, and Australia’s S&P ASX 200 is 0.5% lower. Nikkei fell 1.9% today as yen strengthened on Brexit uncertainty and the yield on Japan’s 20-year government bond fell below zero for the first time ever. Banks and exporters were hit hard, Toyota lost 1.8% and Panasonic dropped 3.2%.

Oil futures prices are slightly higher today after slumping on Tuesday as investors weighted the news OPEC output rose by 240000 barrels a day in June to 32.88 million barrels a day while the pace of US crude oil production declines slowed in June. August Brent crude lost 4.3% to $47.96 a barrel on London’s ICE Futures exchange on Tuesday.

Natural gas is advancing today after posting the largest decline among the energy futures as August natural gas dropped 7.5% to $2.764 per million British thermal units on Tuesday, following a nearly 11% gain last week.

 

Source: http://www.ifcmarkets.com

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