Asian shares slip as Fed, Brexit loom

Author

14 June, 2016

The mood in Asia was less drastic during the session than on Monday, as investors continued to wait for the results of the US Federal Reserve, Bank of Japan and Bank of England meetings this week.

"We might be in for a choppy next few weeks". The broader All Ordinaries index closed down 109.10 points or 2.02 percent to finish at 5,282.50. Against the yen, which tends to increase sometimes when danger hunger falls, partially due to the fact that of Japan's net lender status, the pound fell 0.8 percent to 150.34 yen, having actually fallen to as low as 149.50 yen on Monday.

"Short-term hedge funds have started betting on Brexit, and futures players will likely dominate the market's move today", said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. The Bloomberg dollar spot index, which measures greenback against a basket of currencies, fell 0.03% to 94.547 per dollar, as of 3:48 AM EDT.

ASIA'S DAY: Japan's Nikkei 225 index lost 1 percent to 15,859.00 and Sydney's S&P-ASX 200 lost 2.1 percent to 5,203.30.

Taiwan stocks also pulled back, with the Taiwan Weighted shedding several points to close 2.06% lower than Friday's closing mark. The CSI 300 composite index was recently down 1.44% at 3,118.46. Benchmarks in New Zealand, Singapore and the Philippines also declined.

Toyota's shares were down by more than 1.8%, Honda's shares were 2.8% lower, while Nissan's fell by almost 2.5%. Industrial production grew 0.5 percent in April from March instead of 0.3 percent reported initially. The yen has strengthened 16 percent from a 13-year low of 125.86 per dollar set in June last year. The recent data suggest a downside risk to the economy as growth is under pressure.

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The Bank of Japan, the European Central Bank and several smaller European authorities have ventured into the once-uncharted territory of negative interest rates. Unless BoJ intervenes directly in foreign exchange markets the Yen's strength unlikely to be curbed with all the uncertainty surrounding the financial markets.

In the currency market, yuan hit a two-month low, dragged down by bearish sentiment.

Pounds sterling has been one of the biggest casualties of the lead-up to the vote, down almost 4 per cent against the USA dollar since the beginning of the year.

The Chinese authority has also ramped up efforts to support yuan's global status.

In addition, "the United Kingdom stock market would probably come under more pressure, too, at least in relative terms" and "we suspect that a Brexit would trigger a further rally in United Kingdom government bonds, as investors pushed back their expectations for rate hikes", noted Capital Economics.


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