Monday June 13th

13-06-2016

Wall Street eyes Fed, Brexit as global markets slump

U.S. stock-index futures indicated a lower open Monday, amid a wider "risk-off" move in global indexes, as investors looked ahead to crucial central bank decisions from the U.S. and Japan this week. The Federal Reserve is not expected to take action at its rate decision Wednesday, but the actions of other central banks will likely continue to be felt as their easing programs wash over global bond markets. Sovereign yields have ticked lower recently as traders favor supposed safe haven investments over equities. The European Central Bank added corporate debt to its purchases in the past week, adding more downward pressure on yields. Meanwhile in Asia, the Bank of Japan (BOJ) is also scheduled to hold a policy meeting on June 15 with analysts saying that that bank could surprise markets with additional easing this week. Investors are also expected to remain skittish on the upcoming EU referendum vote in the U.K., due on June 23. A new poll published on Friday showed that the majority of Brits favor leaving the EU which is rattling markets. "Momentum is behind the 'vote leave' camp as polls seem to show more support for Brexit than at any point in the campaign so far. We've seen heavy selling and shortened our Brexit market price from over 80 percent - implying a one-in-five chance of Britain leaving the EU – to 66 percent, which indicates a one-in-three chance of Brexit," Joe Rundle, the head of trading at U.K. spread better ETX Capital, said in a morning note. The worst mass shooting in U.S. history is also likely to weigh on markets, as details unfold about the lone gunman responsible for the killings of at least 50 in a nightclub in Orlando, Fla. early Sunday morning. European stocks traded sharply lower on Monday and in Asia, Japan's Nikkei 225 tumbled 3.51 percent as fresh strength in the yen pressured stocks, with major exporters selling off. U.S. stocks closed lower Friday, weighed by renewed global growth concerns. There are no economic data due on Monday and no significant earnings reports expected in the U.S. Across the Korean Strait, the Kospi closed down 38.57 points, or 1.91 percent, at 1,979.06. In Hong Kong, the Hang Seng index dropped 2.73 percent in the afternoon. Chinese mainland markets ended lower, with the Shanghai composite closing down 94.65 points, or 3.23 percent, at 2,832.50, and the Shenzhen composite off by 91.26 points, or 4.75 percent, at 1,827.35. Oil prices fell on Monday, weighed down by gloomy economic prospects in Europe and Asia and a related strengthening in the U.S. dollar, which makes fuel imports for countries using other currencies more expensive. The softening comes a week after crude prices hit 2016 highs on the back of a quicker-than-expected rebalancing in physical oil markets. Brent crude oil futures fell to $49.82 per barrel by 8:56 a.m. ET (1256 GMT), down 72 cents and near the low of the session. U.S. crude was down 71 cents at $48.36 a barrel. Gold hit its highest since mid-May on Monday, driven higher by a retreat of the dollar and as stocks were knocked by rising risk aversion before key central bank meetings this week and a June 23 vote on whether Britain should leave the European Union. The pound fell to a two-month low against the dollar, pushing gold denominated in sterling to its highest in nearly three years at 909.83 pounds an ounce, up 1.9 percent. Spot gold was up 0.8 percent at $1,284.30 an ounce, off an earlier peak of $1,284.50. U.S. gold futures for August delivery hit $1289.60 Monday, the highest level since May 16.