US, Global Stock Markets Weak Ahead of Fed Meeting

A car is filled with gasoline at a gas station pump in Carlsbad California
A car is filled with gasoline at a gas station pump in Carlsbad California

15 June, 2016

Uncertainty around Britain's possible exit from the European Union, also known as the Brexit, could foster a highly volatile market for the next few weeks, according to strategists.

Oil prices retreated overnight after data provider Genscape Inc. tipped a 525,000-barrel increase in USA crude stockpiles in the week ended June 10. The Standard & Poor's 500 index lost nine points, or 0.2 percent, to 2,072 and the Nasdaq composite fell nine points, or 0.2 percent, to 4,839.

The US Federal Reserve will conclude a two-day meeting tomorrow and while it is not expected to hike interest rates for several months, investors hope it will give some guidance on monetary policy.

LOUSY CREDIT: Synchrony Financial, the country's largest issuer and manager of store brand credit cards, plunged $4.26, or 14 percent, to $26.23 after the company disclosed that more of its customers were falling behind on payments.

With the June 23 vote approaching, four out of the last five published opinion polls have put the "Leave" camp ahead. The yield on the 10-year Treasury note briefly fell below 1.6% Tuesday for the first time since December 2012.

Yields on German sovereign bonds, a benchmark of financial security, were pushed into negative territory for the first time, meaning investors were paying to hold them.

Investors have grown increasingly nervous as signs of economic weakness raise uncertainty about what the Fed will say about the economy and interest rates when its meeting ends tomorrow.

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Highlighting the grave concerns of investors over the possibility of a vote to exit the European Union, called as "Brexit", instability in the British pound reached its maximum in around 20 years, surpassing the heights seen when Lehman Brothers, US investment bank, bankrupted in 2008 economic crisis.

Luke Hickmore, an investment director at Aberdeen Asset Management in London, said bond yields could fall even further as investors become more uncertain about the referendum's outcome.

The debate now among traders is whether the BoJ will take policy steps on Thursday aimed at weakening the currency, when a vote for a Brexit next week would be expected to drive more yen buying as a safe haven.

"Outside the European Union we can become richer, safer and free at long last to forge our own destiny - as America, Canada, Australia, New Zealand and many other great democracies already do", the paper said.

ENERGY: Benchmark U.S. crude fell 46 cents to $48.42 per barrel in electronic trading on the New York Mercantile Exchange. The euro edged down to $1.1202 from $1.1293.

Ahead of this week's Bank of Japan meeting, traders say strong resistance around 105.50 has kept the yen from surging towards 100 per dollar - levels which many assume would force the Bank of Japan to intervene against its currency.

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