Global equities retreat as geopolitical tensions rise - 6.6.2017

US indices slip on weak data

US stocks ended lower on Monday. The dollar rebounded: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, inched up 0.15% to 96.817. S&P 500 ended lower 0.1% settling at 2436.10 led by utilities and materials stocks with seven out of 11 main sectors finishing lower. The Dow Jones industrial average slipped 0.1% to 21184.01 led by Apple and United Technologies stocks. The Nasdaq composite index lost 0.2% closing at 6295.68.

US stock indices retreated as rising geopolitical concerns undermined investor optimism following Saturday London terrorist attacks ahead of UK election on Thursday. Stocks are trading near all-time highs with earnings season nearly over. Investors are weighing the chances of a rate hike at Federal Reserve’s June meeting after worse than expected May jobs report. Economic data were soft: the ISM Non-Manufacturing index slipped to 56.9 in May from 57.5 in previous month, a 12-year high. However services sector’s expansion continues, as a reading above 50 indicates expansion. Factory orders fell 0.2% in April. Despite lower than expected growth in May nonfarm payrolls and latest weak data investors still expect a rate hike in June: fed funds futures traders are pricing in a 95.8% likelihood of a rate hike. Today at 16:00 CET Job Openings and Labor Turnover Summary will be released in US. The tentative outlook is neutral for the dollar.

DJI

Banco Popular Espanol leads European equities lower

European stock indices ended lower on Monday as markets in Germany, Switzerland, Norway, Denmark, Austria, Greece and Ireland were closed for a public holiday. The euro slipped while the British Pound managed to end higher against the dollar. The Stoxx Europe 600 index lost 0.1%. France’s CAC 40 fell 0.7% and UK’s FTSE 100 ended lower 0.3% at 7525.76.

Shares in Banco Popular Espanol led the losses plunging 18.2% on news the Spanish lender may not find a buyer and may have to go out of business. After terror incidents in London investors are concerned whether Prime Minister May’s Conservative Party will manage to keep its majority in parliament. Analysts think Conservatives need the majority to successfully negotiate with the European Union and avoid hard Brexit outcomes. In economic news euro-zone’s May final Services PMI was upgraded to 56.3 from a flash reading of 56.2, and the final Composite PMI was confirmed at 56.8. Today at 11:00 CET euro-zone April retail sales will be published. The outlook is negative for euro.

Asian stocks track Wall Street

Asian stock indices are mostly down today. Nikkei ended 1% lower at 19979.90 today with yen resuming gains against the dollar. Chinese stocks are lower: the Shanghai Composite Index is down 0.1%, while Hong Kong’s Hang Seng Index is 0.3% higher supported by demand from Chinese funds under the Stock Connect program. Australia’s All Ordinaries Index is down 0.9%, with the Australian dollar little changed after the current account deficit narrowed to its smallest in more than 15 years last quarter. In a widely expected decision the Reserve Bank of Australia left the rates at a record low 1.5% after last easing in August of 2016.

Oil down on rising Middle East tensions

Oil futures prices are declining today on concerns rising tensions between OPEC members may result in falling apart of the output cut agreement. Prices fell on Monday as Saudi Arabia and three other countries cut ties with Qatar, raising uncertainty about Middle East oil production. August Brent crude lost 1% settling at $49.47 a barrel on Monday on London’s ICE Futures exchange.