Brexit risk rattles markets as stocks sink

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Brexit risk rattles markets as stocks sink
A pedestrian walks past an electronic board showing the stock market indices of various countries outside a brokerage in Tokyo. Japan's Topix slumped 3.5 per cent on Monday. - Reuters

Bourses have slumped since last week as investors brace for a series of key events this month

By James Regan And Yuko Takeo

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Published: Mon 13 Jun 2016, 3:56 PM

Last updated: Tue 14 Jun 2016, 12:10 AM

london - Growing anxiety over the prospect of the UK exiting the European Union dominated financial markets, sending global stocks down for a third day and the British pound to an eight-week low while boosting demand for havens such as the yen and gold.

In Europe, equities headed for the lowest close since February and the pound weakened against all of its 16 major peers after polls showed the outcome of a referendum on whether Britain will stay in the EU was too close to call.

The yen rose toward its strongest level since 2014, while the cost of insuring corporate debt against default increased to the highest in more than two months. Oil retreated after a report showed a jump in US drilling rigs.

Financial markets have slumped since the middle of last week as investors braced for a series of key events this month including the UK's June 23 referendum on EU membership. While a poll on Friday showed a 10 percentage-point lead for the leave campaign, other surveys released over the weekend indicated the pro-EU camp and those supporting an exit were neck and neck. Investors are also bracing for monetary policy reviews this week in the US and Japan.

"Everything is about Brexit right now," said Richard Falkenhall, a trading strategist at SEB AB in Stockholm. "When you watch the polls they're tighter than they've ever been. So there is a lot of uncertainty out there at this point." The Stoxx Europe 600 Index dropped 1.5 per cent at 10:50am in London.

Carmakers posted the biggest decline of the 19 industry groups on the equity gauge, with BMW falling 2.1 per cent after its sales chief told Automobilwoche that the US market "will stagnate at best" in 2016. Energy companies also slid, led by Tullow Oil, as crude retreated.

Siemens retreated one per cent after chief executive officer Joe Kaeser said his company isn't bidding for robot-maker Kuka.

G4S declined six per cent after confirming that the man suspected of killing 50 people and wounding 53 others in a mass shooting Sunday in Florida was an employee since 2007.

Futures on the S&P 500 fell 0.3 per cent, indicating US equities will extend declines after Friday dropping the most in three weeks amid concern over tepid growth and potential further market turbulence. Japan's Topix slumped 3.5 per cent. The MSCI Emerging Markets Index slid 1.7 per cent, down 3.8 per cent in three days. That's the biggest loss for a day in a month and for a three-day period in five months. Equity benchmarks lost at least 1.5 per cent in South Korea, Turkey and Taiwan.Russian markets were closed for a holiday.

The Shanghai Composite Index lost 3.2 per cent as trading resumed following holidays and the Hang Seng China Enterprises Index of mainland stocks listed in Hong Kong fell 2.8 per cent, down 4.9 per cent over two days. Chinese data released Monday added to evidence that the world's second-largest economy is stabilising.

Bonds

US Treasuries due in a decade advanced for a fifth day, pushing the yield down two basis point to 1.62 per cent. The yield on similar-maturity Japanese debt dropped as low as minus 0.165 per cent on Monday, while the UK's fell to 1.20 per cent. New Zealand's yield declined to 2.5 per cent for the first time. German government bonds are in "bubble territory" and Allianz SE plans to raise its corporate debt holdings, Chief Investment Officer Andreas Gruber said in an interview. - Bloomberg


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