On 14 June, 2016 – Global stocks slide
Stocks retreated as investors waited for central bank decisions and the results of the Brexit vote.
United States
Shares retreated for a fourth day as nervous investors waited the Federal Reserve’s decision on interest rates and worried about Britain’s Brexit vote. The Dow Jones industrials were down 0.3 percent, the S&P declined 0.2 percent and the Nasdaq edged 0.1 percent lower. The selloff is occurring just a few days after the S&P hit its highest in almost eleven months.
The Federal Reserve began its two day FOMC meeting. While virtually no one anticipates an increase in its fed funds rate, bank watchers (and others) will closely parse the announcement and listen carefully to Chair Janet Yellen at her press conference following the announcement. Stocks also were under pressure from the uncertainty surrounding the June 23 vote in the UK on Brexit. Polls show the vote could go either way.
Synchrony Financial, the country’s largest issuer and manager of store brand credit cards, plunged after it disclosed that more of its customers were falling behind on payments. The company is also taking losses on more accounts than anticipated. American Express and Capital One Financial tumbled. JPMorgan and Citigroup were lower.
May retail sales were up a greater than anticipated 0.5 percent after increasing 1.3 percent in April.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$6.35 to US$1,287.15. Copper futures were down 0.4 percent to US$2.04. WTI spot crude was down 40 US cents to US$48.48. Dated Brent spot crude was down 58 US cents to US$49.77. The US dollar was up against the euro, pound and the Canadian and Australian dollars. The currency was virtually unchanged against the yen and Swiss franc. The Dollar Index was up 0.7 percent. The yield on US Treasury 30 year bond was unchanged at 2.43 percent while the yield on the 10 year note was up 1 basis point to 1.62 percent.
Europe
Stocks retreated yet again Tuesday to reach their lowest level in three months. Investor sentiment continues to be rocked by growing concerns that the UK will exit the European Union. The FTSE was down 2.0 percent, the CAC declined 2.3 percent, the DAX lost 1.4 percent and the SMI slid 1.8 percent. The British pound hovered near a two-month low and the yield on the 10-year government debt of Germany dipped below zero for the first time ever, reflecting growing anxiety over the prospect of the U.K. exiting the EU.
Investors are also hesitant to take positions prior to Wednesday’s FOMC announcement and Chair Janet Yellen’s press conference. While the Fed is widely expected to leave interest rates unchanged, traders will closely parse the accompanying statement.
RWE and E.ON were down. Automakers Daimler, BMW, Volkswagen Peugeot and Renault declined. Total and Technip retreated. In Paris, Société Générale, BNP Paribas and Crédit Agricole were lower. Premier Farnell soared after Swiss-based Dätwyler Holding agreed to buy the company for 165 pence in cash per share. Ashtead Group advanced after its full year earnings per share rose to 81.0 pence from 60.1 pence a year ago. Barclays, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered retreated. Mining stocks were also under pressure with Anglo American, Antofagasta, BHP Billiton and Glencore declining.
Eurozone April industrial production climbed 1.1 percent on the month after declining by a revised 0.7 percent the month before. May UK consumer prices were up 0.3 percent as a rise in transport costs largely offset the decline in clothing and footwear prices.
Asia Pacific
Most Asian stocks declined Tuesday, as falling oil prices, worries about global growth and renewed strength in the yen added to the impending uncertainty over the outcome of the UK’s EU referendum. The Shanghai Composite was up 0.3 percent ahead of MSCI’s decision on whether to add Chinese A-shares to its Emerging Markets Index. The Hang Seng was down 0.6 percent.
The Nikkei tumbled 1.0 percent as falling government bond yields and a strengthening yen kept financials and exporters under pressure. The yen stood near a three-year high against the euro and hovered near six-week highs against the US dollar despite Finance Minister Taro Aso issuing a warning on the yen’s strength and claiming the right to intervene based on the G20 and G7 agreements. Mizuho Financial Group, Mitsubishi UFJ Financial and Sumitomo Mitsui Financial were down as bond yields slipped to new record lows on worries over a possible British exit from the European Union. Among exporters, Canon, Honda Motor, Mazda, Panasonic and Sharp were lower. Apparel store operator Shimamura gained on a Nikkei report that its group operating profit apparently jumped 30 percent in the March to May period from a year earlier.
The S&P/ASX tumbled 2.1 percent while the All Ordinaries slid 2.0 percent as trading resumed after the Queen’s Birthday holiday on Monday. Caution crept in ahead of key central bank meetings this week and the Brexit vote in Britain next week. The big four banks dropped as global bond yields kept falling. BHP Billiton tumbled 3 even as a court in Brazil dismissed a $5.7 billion civil lawsuit against Samarco, a joint venture between BHP Billiton and Brazil’s Vale. Rio Tinto and Fortescue Metals Group also were lower.
The Kospi was down 0.4 percent amid renewed fears over a British exit from the European Union. The Sensex was virtually unchanged (down 1.06 points).
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 issues its labour market report for May. In the US, May producer prices and industrial production are released along with the June Empire State manufacturing survey. The FOMC announces its monetary policy decision. The announcement is followed by Fed Chair Janet Yellen’s quarterly press conference.
*Note — all releases are listed in local time.
Source: Fidelity
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