Thursday June 16th

16-06-2016

US futures lower after Fed, BOJ hold rates; oil weighs

U.S. stock-index futures indicated a lower open Thursday, following rate decisions by the U.S. Federal Reserve and the Bank of Japan. The Federal Reserve kept rates unchanged at its June meeting. Six members projected only one hike this year, although the median expectation remained two hikes this year. U.S. stocks gave up gains towards the end of the trading day. Yellen said at her press conference Wednesday that Brexit concerns were a factor in the central bank's latest monetary policy decision. "It was fair to say it was one of the factors that factored into today's decision," she said at a news conference after the Fed kept interest rates unchanged, as was widely expected. Meanwhile, the Bank of England said next week's Brexit vote could harm the global economy, minutes from their June 15 meeting showed. "Through financial market and confidence channels, there are also risks of adverse spill-overs to the global economy," the minutes said, according to Reuters. The bank also kept interest rates unchanged. In Japan overnight, the central bank held rates steady Thursday, sending the yen sharply higher and sparking speculation on whether policymakers would intervene to halt the currency's rise. By the end of the trading day, the Nikkei 225 closed down 485.44 points, or 3.05 percent. The yen also hit its strongest levels against the dollar in almost two years, at 103.55 yen. The rest of Asian markets were mostly lower, as investors digested the Federal Reserve's decision to keep interest rates on hold Wednesday. In South Korea, the Kospi closed down 16.84 points, or 0.86 percent, at 1,951.99. In Hong Kong, the Hang Seng index fell 1.98 percent in late afternoon trade. Chinese mainland markets closed lower, with the Shanghai composite down 13.73 points, or 0.48 percent, at 2,873.47, and the Shenzhen composite down 4.43 points, or 0.23 percent, at 1,885.43. Also pressuring U.S. futures were oil prices, which fell more than 1.5 percent to trade near $47.20 a barrel. In Europe, stocks opened sharply lower with continued jitters over the upcoming referendum on Britain's membership of the European Union. The Swiss National Bank also kept its benchmark rates on hold at a policy decision on Thursday morning. "It is impossible to know just much dust will need to settle after next week's U.K. referendum on EU membership; but if it is at all possible to put this to one side, then the juxtaposition of the Fed and BOJ policy meetings on the 27th and 29th of July respectively are an intriguing prospect, not least for U.S. and Japanese relations," Neil Mellor, a currency strategist at BNY Mellon, said in a morning note. "The chances of the FOMC hiking interest rates in holiday-thinned markets on July 27 appear decidedly slim." In economic news, jobless claims rose to 277,000. CPI rose 0.2 percent in May for a year-over-year increase of 1 percent. The Philly Fed index was 4.7 in June, up from May's negative 1.8 print. The current account deficit was $124.7 billion. Treasury yields were mixed, with the 2-year yield higher near 0.69 percent and the 10-year yield a touch lower around 1.57 percent. The U.S. dollar index traded a third of a percent higher, with the euro around $1.119. The National Association of Home Builders (NAHB) survey will be released at 10 a.m. ET. On the earnings front, Oracle and Smith & Wesson are both due to release new figures after the closing bell on Thursday. Oil prices hit their lowest in more than three weeks on Thursday, the sixth straight day of losses and longest bearish run since early 2016, as U.S. crude stocks fell less than expected and concerns over Britain's future in the EU weighed. Brent crude futures, the global benchmark, have slipped 9 percent in just five sessions after touching an eight-month high of nearly $53 a barrel a week ago. On Thursday, the contract fell 94 cents at $48.03 by 8:50 a.m. ET (1250 GMT). It fell as low as $48.14, the weakest level since May 24, and was set for the longest losing streak in five months. Front-month U.S. crude futures were down 96 cents, or 2 percent, at $47.05 a barrel, near a one-month low for the session. Gold rallied to a two-year high after the Federal Reserve sounded a less dovish note after its latest policy meeting, and as the dollar sank to a 21-month low versus the yen. The Fed's cautious stance comes ahead of a British referendum on June 23 on whether to leave the European Union, which has dented appetite for assets seen as higher risk and sent investors scurrying for bonds and gold. Spot gold was up 1.04 percent at $1,304.60 an ounce, while U.S. gold futures for August delivery were up $19.30 an ounce at $1,307.60. Spot prices have bounced 7 percent this month after sliding to 3-1/2 month lows on May 30.