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Jun 27, 2016

U.S. Stock Market Future Indications Update, by MarketWatch on June 27, 2016: Wall Street on Track for Post-Brexit Selloff


www.marketwatch.com
marketwatch.com

Ellie Ismailidou, Sara Sjolin
 
U.S. stock futures on Monday slightly pared their losses but were still in negative territory, as shock waves from the U.K.’s Brexit vote last week continued to undercut appetite for global stocks.
Amid the global flight to quality, risk assets like European equities and oil CLQ6, -1.97% got hammered, while the pound GBPUSD, -3.2539% slid to a 31-year low. Gold futures and bonds GCQ6, +0.67%  benefited from safe-harbor purchases, pushing higher government bond yields to record lows.
Futures for the Dow Jones Industrial Average YMU6, -0.56%  were down 100 points, or 0.6%, to 17,147, while S&P 500 index ESU6, -0.46%  futures fell 9 points, or 0.5%, to 2,009. Nasdaq-100 index futures NQU6, -0.59%  lost 24 points, or 0.6%, to 4,237.
Read: S&P 500 could drop as much as 7% in Brexit swoon
The losses follow a plunge on Friday, when investors shunned anything considered a risky asset. The selloff came after the U.K. unexpectedly voted to leave the European Union, or Brexit.
That vote sparked a drop of more than 650 points for the Dow average DJIA, -3.39%  at one point, before it trimmed losses to close 611 points, or 3.4% lower. The Nasdaq Composite Index COMP, -4.12%  and S&P 500 index SPX, -3.59%  lost 4.1% and 3.6%, respectively.
“There is little doubt that global monetary policy will have to adjust to this historic decision, and with markets now pricing in a 50% chance of a July rate cut from the [Bank of England], the idea of a [Federal Reserve] rate hike appears dead in the water,” said Joshua Mahony, market analyst at IG, in a note.
Fed Chairwoman Janet Yellen said ahead of Thursday’s historic referendum in the U.K. that a Brexit was one of the risks facing the global economy that could justify a cautious approach to raising interest rates. According to the CME Fed Watch tool, there’s currently a 0% probability of a Fed rate increase in July.
Clinton: Brexit means U.S. needs an experienced leader
In her response to the U.K.’s decision to leave the European Union, Hillary Clinton said the vote calls for “steady, experienced leadership” to guide the U.S. through economic uncertainty.
Banking blues: Banks were among the biggest decliners in Friday’s Brexit-fueled selloff and were mostly set for more losses on Monday.
Shares of Bank of America Corp. BAC, -7.41%  lost 1.7% premarket, while J.P. Morgan Chase & Co. JPM, -6.95%  fell 1.6%, and Goldman Sachs Group Inc. GS, -7.07%  slipped 1.2%.
Other movers and shakers: U.S.-listed shares of Randgold Resources Ltd. GOLD, +6.61%  climbed 4.5% ahead of the bell as gold continued to rise in a post-Brexit flight to safety.
Economic news: The U.S. trade gap in goods widened in May, as imports grew while exports fell slightly.
Markit’s flash reading on the U.S. services purchasing managers index for June is due at 9:45 a.m. Eastern. There were no Fed speakers scheduled to talk on Monday. See:MarketWatch’s economic calendar
Other markets: The pound GBPUSD, -3.2539%  was hit hard again, sliding to a 31-year low of $1.3154 from $1.3676 late Friday in New York. In recent trade it recovered slightly to $1.3196.
The Brexit fallout continued to keep European stock markets under pressure. The Stoxx Europe 600 index SXXP, -3.16%  was down 3.2%. The FTSE 100 index UKX, -2.14%  was off 2.2% with the main British political parties, the Conservatives and Labour, in turmoil after the referendum.
Stocks in Asia mostly rebounded. Japan’s Nikkei 225 index NIK, +2.39%  rallied 2.4%, helping lead much of Asian equities higher.
The dollar DXY, +0.50%  rose against most other major currencies, while oil prices CLQ6, -1.97% LCOQ6, -1.71%  moved lower.
The yield on 10-year U.K. government bonds TMBMKGB-10Y, -12.23% dropped below 1% for the first time ever on Monday.