Global stock markets eased while the yen firmed yesterday amid concerns Britain may be on the verge of leaving the European Union following a June 23 referendum on its membership, an outcome that could adversely impact the world economy.
A vote to leave the 28-member bloc, dubbed “Brexit”, could tip Europe back into recession and has surged to the forefront of investor concerns.
Uncertainty over the outcome of this week’s US Federal Open Market Committee policy meeting contributed to market worries, though the US central bank is expected to leave rates unchanged.
A much weaker-than-expected US employment report for May has drastically reduced the chances of the Fed hiking rates either in June or July.
Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York, said Brexit has kept the market on edge. He cited the unknown impact on the British economy, as well as the fact that the exit would “present the first formal challenge to the current global economic order and could spark a much wider and more dangerous fracture of the European Union”.
The euro dropped to its lowest against the yen, 119.01 , since February 2013. It was last at 119.88, down 0.4 per cent. Sterling, which was down broadly, also fell, to a three-year low of 149.50 yen. The pound last traded down 0.7 per cent at 151.79 yen.
Wall Street fell slightly in late morning trading in New York.
The Dow Jones industrial average was down 49.68 points, or 0.28 per cent, to 17,815.66, the S&P 500 lost 6.73 points, or 0.32 per cent, to 2,089.34 and the Nasdaq Composite dropped 24.75 points, or 0.51 per cent, to 4,869.80.
European shares fell to their lowest in more than two months amid unease over a possible British exit from the European Union.
MSCI’s all-country world stock index was down one per cent, while the FTSEurofirst 300 closed down 1.6 per cent.
Data out of China, showing fixed-asset investment slipped below 10 per cent for the first time since 2000, added to day’s weaker tone in equities.
US Treasury yields fell to a four-month low as increased fears about Britain exiting the EU weighed on investor risk appetite.
Benchmark 10-year notes rose 2/32 in price to yield 1.63 per cent, after earlier falling to 1.61 per cent, the lowest since February 11. Ten-year yields in Germany remained near zero, close to record lows.
Oil prices were down in volatile trading. Brent dipped 0.57 per cent to $50.25, while US crude futures fell 0.61 per cent to $48.77.