Tuesday July 5th

5-07-2016

Dow futures briefly fall 100 points as post-Brexit rally fades

U.S. stock index futures indicated a lower open Tuesday, after being closed Monday for the July 4 holiday, with "risk-on" sentiment pausing for breath after a strong rally last week. Dow futures fell 70 points after dropping 100, while S&P 500 and Nasdaq futures were down 9 points and 20 points, respectively. Equities around the world have broken their post-Brexit winning streak as uncertainty surrounding the U.K. vote still persists among investors. The ruling Conservative party will hold the first stage of its selection process for a new leader on Tuesday evening and potential candidates have been busy putting their ideas forward for the post-Brexit environment. Sterling has also fallen to a 2-1/2 year low against the euro and redemptions in one U.K. property fund have been halted after a string of outflows. The pound also fell to a fresh 31-year-low against the dollar early Tuesday. European stocks extended losses in mid-morning trade on Tuesday with added volatility in the Italian banking sector.  "Markets are settling uncomfortably into a post-Brexit dystopia. Rumors abound of crashing business expectations and culls of bankers. But, unlike the continuing hurly-burly of the political world, here on the trading floor we've pretty much gone through all the 8 stages of Brexit: Shock, denial, anger, bargaining, depression, applying for an Irish passport, acceptance.. and finally hope that it might not matter anyway," Bill Blain, a senior fixed income broker at Mint Partners, said in a morning note. In Asia, most markets stumbled on Tuesday, with shares in Australia falling amid an uncertain election outcome and an on-hold central bank. Mainland China shares rose as data showed services activity grew in June. In Japan, the Nikkei 225 closed down 106.47 points, or 0.67 percent, at 15,669.33 on the back of a stronger yen. Across the Korean Strait, the Kospi slid 5.45 points, or 0.27 percent, to 1,989.85. In Hong Kong, the HSI was down 1.44 percent in afternoon trade. Bucking the trend, Chinese mainland markets were higher, with the Shanghai composite closing up 18.50 points, or 0.62 percent, at 3,007.11, while the Shenzhen composite added 4.69 points, or 0.23 percent, to 2,006.37. Back in the U.S., investors will be looking ahead to factory orders data due at 10 a.m. ET. At 2:30 p.m. ET New York Fed President William Dudley will also speak on the local economy at a roundtable discussion in Binghampton, NY. Oil fell below $50 a barrel on Tuesday as concern about a potential slowdown in economic growth that would weigh on demand trumped supply outages in Nigeria and other exporting nations. Trade in one of Britain's largest property funds was suspended in one of the first signs of major financial stress following the country's vote to leave the EU. A flurry of data from China in coming weeks is expected to show weakness in trade and investment. Brent crude was down $1.20, or 2.4 percent, at $48.90 a barrel by 8:44 a.m. ET (1244 GMT). The global benchmark is still up more than 80 percent from a 12-year low close to $27 reached in January. U.S. crude was down $1.34, or 2.7 percent, at $47.65 a barrel. Gold slipped below $1,350 an ounce on Tuesday after the previous day's rally ran out of steam, though prices were supported by continued uncertainty following Britain's vote to leave the European Union. The Brexit vote sparked turmoil across financial markets and sent gold to its highest since early 2014 on June 24. While concerns about global growth and monetary policy continue to support gold it has failed to match that peak since. Spot gold was down 0.2 percent at $1,347.45 an ounce.