The U.S. markets have fallen in morning trading, taking a cue from indices in Europe and Asia which also slumped in earlier sessions. Banks have absorbved the biggest losses today as bond yields dropped further, pushing long-term interest rates lower.
By Paolo Palazzi-Xirinachs
Friday, June 10, 2016
At Noon EST, the Dow Jones Industrial has fallen 0.2% and the S&P 500 is also down 0.2%. The Nasdaq composite index has also dropped 0.07%. Bank stocks were among the worst-hit in broad selling across most sectors. The only sector unscathed in early trading was utilities. Citigroup and Bank of America stocks were both down 2%. And, after rallying earlier in the week, shares of energy companies have also fallen along with oil prices.
Global stocks headed for the biggest drop in two months and bond yields slid to record lows, as investors braced for a series of key events later this month that could renew turbulence in financial markets. In Germany, the DAX tumbled 2.5% and in France, the CAC 40 lost 2%. The FTSE 100 slid 1.8% in Britain as investors are avoiding risk as new polls suggest support for Britain to quit the European Union is growing ahead of a June 23 referendum on the issue. The uncertainty over how a so-called “Brexit” might affect financial markets is driving investors into safer assets, and global indices are pricing in the potential gloom.
Investors are also eagerly awaiting the outcome of a scheduled two-day Federal Reserve meeting that wraps up next Wednesday. Doubts are growing that policy makers will raise interest rates soon; the Fed chairwoman, Janet L. Yellen said on Monday that many lingering uncertainties meant it was unclear when the Fed should resume raising rates.
In global currencies the yen advanced with the Swiss franc as investors have opted for their relative safety. Japan’s currency performed best against the dollar among major currencies, followed by the Swissie. Sterling headed for its second weekly decline versus the dollar before the U.K. votes on June 23 on whether to remain in the EU. Implied volatility for one-month options on the pound versus the dollar rose to 23.39%, the highest since January 2009, and more than double the level at the end of April. Expectations for price swings have climbed every week since the period ended April 29, the longest streak of increases since late February.
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