Monday June 27th

27-06-2016

Dow futures off triple digits, looking set for another rocky session

U.S. stock-index futures pointed to a lower start to trade on Monday, as European stocks and currencies continued to decline following the U.K. vote to leave the European Union (EU). Dow futures implied an open of more than 150 points lower, while the implied opens on the S&P and Nasdaq were 26 points and 55 points lower, respectively. The pan-European STOXX 600 traded down 2.9 percent early on Monday. The internationally focused FTSE 100 traded 1.7 percent lower and the FTSE 250 — which tracks the next 250 biggest U.K. companies — declined by 5.2 percent. The U.K. government is yet to indicate how negotiations to leave the EU trading bloc will proceed. Meanwhile, Prime Minister David Cameron has said he would resign by October and the leader of the opposing Labour Party faces a "vote of no confidence" on Monday. "Day four after the seismic referendum result and the only thing that's crystal clear is that the U.K. is in the midst of one hell of a political crisis," Chris Scicluna, head of economic research at Daiwa Capital Markets, said in a note on Monday. Major Asian indexes closed higher on Monday, with Japan's Nikkei leading gains, ending up 2.4 percent. This followed media reports that Tokyo would step in, if necessary, to stabilize the yen, which has gained from the safe-haven bid that followed the Brexit vote. In South Korea, the Kospi finished near flat at 1,926.85. Hong Kong's Hang Seng index traded near flat in the late afternoon session. Chinese mainland markets closed in positive territory, with the Shanghai composite up 41.23 points, or 1.44 percent, at 2,895.52 and the Shenzhen composite higher by 46.09 points, or 2.42 percent, at 1,946.69. In the U.S. economic news, the advance May trade deficit was $60.59 billion. No major earnings were expected. Risk aversion sent the British pound reeling to near $1.32 on Monday, within view of Friday's 30-year low. Early on Sunday, Goldman Sachs issued a research note warning Britain might enter a recession by next year and sharply downgraded global growth expectations. On Friday, the Dow index tumbled 610 points and each of the major averages fell at least 3 percent. Oil prices steadied on Monday as market participants better absorbed the shock of last week's vote in Great Britain to leave the European Union and as analysts said Brexit would have a limited impact on global fuel demand. Brent crude futures were up 27 cents at $48.14 a barrel. U.S. crude was down 34 cents at $47.30 a barrel. Gold rose on Monday, sticking close to a more than two-year peak reached in the previous session, as uncertainty over Britain's vote to leave the European Union forced investors to sell equities and seek safer assets. Bullion surged 4.8 percent on Friday, its biggest single-day gain since January 2009, as the British vote forced a selloff in risky assets from industrial commodities to stocks and sterling. Gold is often perceived as a hedge against economic and financial risk. Spot gold rose as much as 1.12 percent to a session high of $1,330.30 an ounce and gold futures were up 0.9 percent at $1,334.40. Gold denominated in sterling rose to its highest since April 2013 on Friday, as the currency fell to its lowest in 31 years.