US stock market closed lower for the fourth day on Tuesday as concerns about UK’s possible exit from European Union after June 23 referendum intensified. The dollar strengthened with the live dollar index data indicating the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, closed up 0.6% at 94.936 after US Department of Commerce reported retail sales climbed 0.5% in May for a second straight month. The Dow Jones Industrial Average lost 0.3% settling at 17674.82 led by a 4.1% fall in American Express. The S&P 500 closed 0.2% lower at 2075.32 led by financial and materials stocks. Federal Reserve concludes its policy meeting today and will release its statement and economic forecast at 20:00 CET followed by Yellen’s press conference at 20:30 CET. The Fed is widely expected to leave the interest rate unchanged. Analysts expect the Federal Reserve Chair will likely make a case that the rates can be raised twice this year by suggesting the US economic growth is on track to rebound in the second quarter despite the disappointing May employment report. The stronger than expected May retail sales after an even larger gain in April indicates strong consumer confidence despite a hiring slowdown in May, providing support for expectations of improved growth in the second quarter. Investors will be watching closely what are the policy makers’ projections of interest rates as represented in the dot plot which will be released with economic forecast, and how many officials from 17 voting members of the central bank express support for two rate hikes. In other economic data the cost of goods imported to the US rose 1.4% in May, the biggest increase in four years. Today at 13:00 CET Mortgage Applications will be released in US. At 14:30 CET May Producer Price Index and June Empire State Manufacturing Index will be published. The tentative outlook is positive. At 15:15 CET May Industrial Production and Capacity Utilization will be released. The tentative outlook is negative.
European stocks retreated for the fifth session on Tuesday as polls indicated increasing support for UK’s leaving of the EU among likely British voters. The euro edged lower against the dollar. The Stoxx Europe 600 fell 1.9%. Bank shares extended losses as interest rates fell to record lows with investors purchasing safer government bonds, driving yields lower. The yield on the 10-year German government bond turned negative for the first time ever hitting minus 0.003%. Germany’s DAX 30 index fell 1.4% to 9529.20, while France’s CAC 40 index tumbled 2.3%. UK’s FTSE 100 index dropped 2%. Today at 10:30 CET labor market data will be released in UK. The April unemployment rate is expected to remain unchanged at 5.1% while average weekly earnings over a three month period ending in April are expected to fall year-on-year to 1.7% from 2.0%. At 11:00 CET April Trade Balance will be released in euro-zone. The tentative outlook is negative for euro.
Asian stocks are switching between gains and losses today with MSCI's broadest index of Asia-Pacific shares outside Japan essentially unchanged. Chinese stocks erased earlier losses shrugging off the news MSCI decided not to add local Chinese shares to its key emerging market index, the Shanghai Composite Index is up 1.57%. Nikkei rose 0.4% to 15919.58 today with yen weakening slightly from a six-week high against the dollar as the Bank of Japan starts its two day policy meeting. The Bank of Japan is widely expected to keep its monetary policy unchanged, while some investors don’t exclude the possibility the central bank may decide to expand the stimulus program in light of heightened uncertainty in global financial markets.
Oil futures prices are falling today with dollar strengthening on the back of increased concern about possible UK exit from EU. At 16:30 CET US Crude Oil Inventories will be released by Energy Information Administration. Data from the American Petroleum Institute released late Tuesday showed US crude inventories rose by 1.2 million barrels to 536.7 million last week while a decline was expected. July West Texas Intermediate crude lost 0.8% settling at three week low of $48.49 a barrel on the New York Mercantile Exchange on Tuesday.