On 13 June, 2016 – Risk aversion grows
Brexit fears send global stock indices downward.
United States
Stocks followed global shares lower as investors waited for the outcome of the FOMC meeting on Wednesday and next week’s vote in the UK on retaining its membership in the European Union. The Dow Jones industrials were down 0.7 percent, the S&P retreated 0.8 percent and the Nasdaq tumbled 0.9 percent. Expectations are that the FOMC will refrain from increasing its policy fed funds rate — investors will carefully parse Fed Chair Janet Yellen’s comments at her press conference following the decision. There were no new economic data on Monday.
Shares of LinkedIn soared after Microsoft announced it would buy the company for $26.2 billion in cash. Shares of Microsoft retreated after the deal was announced. Twitter rose on speculation that LinkedIn’s buyout could mean better buyout prospects for Twitter. Symantec gained after the company said it would buy another security company, Blue Coat, for $4.6 billion. Blue Coat had plans to go public later this year. Apple declined as the company held its developers conference in San Francisco. Facebook declined after CNBC said Citron Research was short on the stock.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$5.30 to US$1,280.80. Copper futures were up 1.2 percent to US$2.05. WTI spot crude was down 54 US cents to US$48.53. Dated Brent spot crude was down 54 US cents to US$50.00. The US dollar was up against the pound and the Canadian dollar. However, it declined against the yen, euro, Swiss franc and the Australian dollar. The Dollar Index was down 0.3 percent. The yield on US Treasury 30 year bond was down 2 basis points to 2.43 percent while the yield on the 10 year note declined 3 basis points to 1.61 percent.
Europe
Stocks tumbled sinking to their lowest level in two months. Continued concerns over Brexit contributed to the retreat. Financial stocks were among the weakest performing stocks, as bond yields continue to slip to new record lows. The continued pull back in crude oil prices weighed on energy stocks. However, gold stocks were among the best performing stocks, as investors flocked to safe havens. The FTSE declined 1.2 percent, the CAC retreated 1.9 percent and both the DAX and SMI dropped 1.8 percent. European markets were under pressure in early trading thanks to the declines in Asia.
Banks in Europe and the UK retreated. Commerzbank, Deutsche Bank, Lloyds Banking Group, Barclays, Standard Chartered, Crédit Agricole, Société Générale and BNP Paribas all finished lower. ThyssenKrupp and Salzgitter tumbled. Both Technip and Total were down. Inmarsat climbed after it entered into a strategic partnership with SpeedCast International. Randgold Resources and Fresnillo advanced.
Asia Pacific
Asian stocks fell sharply Monday as falling oil prices, disappointing Chinese data and weak indications from offshore markets dampened investor sentiment ahead of the Fed and BoJ meetings and the upcoming Brexit referendum June 23. Crude prices extended losses after tumbling Friday as US drilling data showed an uptick in activity. Australian markets were closed for a national holiday, the Queen’s Birthday.
The Shanghai Composite dropped 3.2 percent and the Hang Seng lost or 2.5 percent as mixed data from China overshadowed recent optimism that MSCI could add mainland Chinese stocks to its benchmark Emerging Markets Index. May industrial output was up 6.0 percent from a year earlier for a second month. Retail sales grew by a slightly less than expected 10 percent and growth in fixed-asset investment slipped below 10 percent for the first time since 2000 in January to May.
The Nikkei tumbled 3.5 percent and in the process hit five week lows as Brexit woes lifted the yen to a fresh one month high against the dollar and a three year high against the euro. Exporters bore the brunt of the selling, with Canon, Panasonic, Toshiba, Sharp and Sony retreating. Automakers Honda Motor, Mazda, Nissan, Suzuki Motor and Toyota dropped. Also declining were Fast Retailing, Fanuc, Softbank and Mitsubishi UFJ Financial.
The Kospi was 1.9 percent lower, weighed down by foreign investor selling on anxiety about a potential British exit from the European Union. The Sensex was down 0.9 percent.
Global Stock Markets
Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
The UK releases May consumer and producer price indices. The Eurozone posts April industrial production. In the US, the FOMC meeting begins. May retail sales and import/export prices will be reported along with April business inventories.
*Note — all releases are listed in local time.
Source: Fidelity
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