By IFCMarkets

US stocks suffered the second day of sharp declines on Monday as investors sold off risky assets in the light of increased uncertainty for global economy after the UK voted to leave the European Union. The dollar strengthened as British Pound hit the lowest level since 1985. According to the live dollar index data the ICE US Dollar Index, a measure of the dollar’s value against a basket of six major currencies, rose 0.7% to 96.348. The Dow Jones industrial average lost 1.5% settling at 17140.24 led by American Express, down 4%. The S&P 500 closed 1.8% lower at 2000.55 led by materials and financial stocks down 3.4% and 2.8% respectively. Eight of ten main sectors closed in negative territory. Utilities and telecom stocks were the best performers. The Nasdaq Composite Index sank 2.4%. US Treasury yields fell to four-year lows as government bond prices surged with investors increasing purchases of haven assets: the yield on the benchmark 10-year Treasury note dropped 11.6 basis points to 1.461%, the lowest since July 2012. Bank stocks were hit hard as Federal Reserve is expected to hold off raising interest rates, hurting earnings prospects of banks which will not be able to earn more as rates are kept low. Bank of America tumbled 6.3% while JP Morgan lost 3.3%. In economic news the US trade deficit widened in May as imports grew while exports fell slightly. June flash purchasing managers index came in at 51.3, unchanged from May’s level. Today at 14:30 CET final reading of first quarter US GDP will be released, together with personal consumption and core personal consumption expenditures. The tentative outlook is positive. At 15:00 CET Case-Shiller Composite House Price Index for April will be published, the outlook is positive. At 16:00 June Consumer Confidence and Richmond Fed Manufacturing Index will come out, the tentative outlook is positive.

European stocks recorded second session of steep losses on Monday as investors continued selling off equities on worries about negative impact of Brexit on European Union economic outlook. The euro weakened together with Pound which touched $1.3197, the weakest level since 1985. S&P Global Ratings downgraded UK’s AAA credit rating to AA and maintained its negative outlook on UK’s credit rating, citing increased risk to the country’s economic prospects. Fitch Ratings followed S&P Global Ratings lowering the UK’s credit rating to AA from AA+, and revised down its outlook on the UK’s economic growth to 1.6% from 1.9% in 2016. The Stoxx Europe 600 index dropped 4.1%. Brexit resulted in added uncertainty for European Union outlook besides the immediate impact of UK’s departure from the trade union as more political parties in other member states are calling for their own referendum. Financial stocks led the decliners, Credit Suisse plunged 9.2%, Deutsche Bank lost 6.2%. Germany’s DAX 30 index fell 3% to 9268.66. France’s CAC 40 index also dropped 3% while the UK’s FTSE 100 index lost 2.6%. No important economic data are expected today in euro-zone.

Asian stocks are mixed today in thin trade with uncertainty after UK’s decision to leave the EU weighing on market sentiment. Hong Kong’s Hang Seng Index is down 0.52% while Shanghai Composite Index is up 0.51%. Australia’s All Ordinaries Index is down 0.7%. Nikkei edged up 0.1% today erasing steep earlier losses as yen weakened against the dollar. Exporters extended losses with Toyota down 3.4% and Honda lower 0.1%.

Oil futures prices are edging higher today with the possibility of Norwegian workers going on strike from Saturday threatening to cut output in Europe’s biggest producer. About 755 Norwegian workers on seven oil and gas fields could go on strike if a new wage deal is not agreed before a Friday deadline. August Brent crude lost 2.6% settling at $47.16 a barrel on London’s ICE Futures exchange on Monday.

Gold is steady today after spot gold rose 0.7% on Monday. It gained 4.8% on Friday on jump in haven demand after Brexit vote.

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