Wednesday June 15th

15-06-2016

US futures hold higher amid data; Fed decision eyed

U.S. stock-index futures indicated a higher open Wednesday, following some hefty selling in global equity markets, as investors eyed an upcoming rate decision by the U.S. Federal Reserve. The Federal Open Market Committee is expected to end its two-day meeting at 2 p.m. ET without a further hike in interest rates. Its post-meeting is not expected to shed any light on the timing of its next rate rise. But it is expected to continue to say it will hike rates if the economic data is good enough. The Fed could also note that it is monitoring international developments, particularly since the upcoming U.K. vote on exiting the European Union has been troubling markets. Investors continue to fret over a so-called Brexit with daily polls showing a strengthening for the leave campaign. On Wednesday, British Finance Minister George Osborne warned voters that he will take new austerity measures if the country decides to leave the EU in next week's referendum. "If you think the current level of market volatility is high, it will get a lot worse if Britain votes for Brexit next week. It's not a panic yet but there are clearly signs of stress in the (City of London) and the wider markets. Traders are getting nervous and for good reason," Andrew Edwards, CEO of spread better ETX Capital, said in a morning note. "Several recent polls suggest Britain will head for the exits - the latest survey gives leave a 7-point lead." U.S. stocks closed lower Tuesday, amid declines in oil prices. On Wednesday morning, European stocks traded higher after a rocky start and in Asia, Chinese markets led gains in a mixed session, shrugging off a decision by stock index provider MSCI on Tuesday to delay inclusion of mainland-traded Chinese A shares in its key emerging market index. The Shanghai composite and the Shenzhen composite each erased opening losses of more than 1 percent to close up; the Shanghai benchmark index added 44.73 points, or 1.57 percent, to 2,886.92, while the Shenzhen composite gained 57.24 points, or 3.12 percent, to 1,889.86. Australia's ASX 200 closed down 56.16 points, or 1.08 percent, at 5,147.10, with all sectors finishing lower. In Japan, the Nikkei 225 halted a four-session losing streak to finish up 60.58 points, or 0.38 percent, at 15,919.58. Across the Korean Strait, the Kospi slipped 3.2 points, or 0.16 percent, to 1,968.83. In Hong Kong, the Hang Seng index was up 0.31 percent in late afternoon trade. Back in the U.S., traders monitored fresh data with may PPI and an Empire State survey both coming in better than expected. Industrial production numbers are due at 9:15 a.m. ET. Fed Chair Janet Yellen's press briefing will take place at 2:30 p.m. ET and TIC data will be released at 4 p.m. ET. Crude futures fell for the fifth consecutive session on Wednesday as mounting concerns about Britain's possible exit from the European Union and a surprise build in U.S. inventories overshadowed an IEA declaration that oil markets are now in balance. U.S. crude fell to a three-week low of $47.55. It was trading down 51 cents at $47.98 a barrel at 8:07 a.m. ET (1207 GMT). Brent was 76 cents lower at $49.07 a barrel, after hitting its lowest level in around two weeks. A series of production disruptions in Nigeria, Venezuela, Libya and Canada helped push oil to a 2016 high of $52.86 last week. Data from the American Petroleum Institute showed U.S. crude inventories rose by 1.2 million barrels in the week to June 10 to 536.7 million, compared with analyst expectations for a decrease of 2.3 million barrels. Gold fell from the previous session's six-week high ahead of a Federal Reserve policy decision later on Wednesday, though concerns over an upcoming vote on Britain's membership of the European Union underpinned prices. The metal has rallied for the last five sessions as assets seen as higher risk, such as shares, saw heavy losses on the back of Brexit fears, while yields on safe-haven German Bunds fell below zero for the first time. Gold has taken a breather, however, as dealers await the Fed meeting. The metal is highly sensitive to U.S. interest rates, increases in which lift the opportunity cost of holding non-yielding gold, while boosting the dollar, in which it is priced. Spot gold was down 0.3 percent at $1,281.61 an ounce, while U.S. gold futures for August delivery were down $3.40 an ounce at $1,284.70.