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US stocks fall on ‘Brexit’ fears; European shares rally

WT24 Desk

NEW YORK – US stocks dropped for the fifth straight session Wednesday as Federal Reserve Chair Janet Yellen highlighted concerns about Britain’s upcoming vote on whether to exit the European Union, AFP reports. Yellen’s remarks followed the Fed’s expected decision to keep interest rates unchanged and came on a day when bourses in Europe and Asia snapped out of a losing trend and pushed higher.

“Markets have taken a bit of a Brexit breather,” said analyst Jasper Lawler at CMC Markets.  Analysts had seen virtually no chance the Fed would hike rates after a weak May jobs report.
Despite keeping rates low, Fed policy makers remained confident enough in hiring resuming a solid pace, and in inflation picking up, that it indicated it still expected that the fed funds rate would be increased twice over the next six months to near 1.0 percent.

Still, Yellen alluded to anxiety over polls that have shown Brexit supporters picking up momentum ahead of the June 23 referendum.  “Clearly, this is very important decision for the United Kingdom and for Europe,” she said.  “It is a decision that could have consequences for economic and financial conditions in global financial markets. If it does so, it could have consequences in turn for the US economic outlook.”

Wall Street had been in modestly positive territory all day, but fell into the red in the final half hour after Yellen’s news conference ended. The S&P 500 shed 0.2 percent.  Some investors likely sold after the Fed announcement failed to spur a major rally, said Mace Blicksilver, director of Marblehead Asset Management.

The dollar retreated against the euro and yen.

– European ‘bargain-hunting’ –

London’s benchmark FTSE 100 index closed 0.7 percent higher, while in the eurozone Frankfurt’s DAX 30 gained 0.9 percent and the Paris CAC 40 won 1.0 percent. “After a torrid few days for markets, European investors are bargain hunting, having concluded the market is oversold,” said Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor.

Asian stocks also rebounded Wednesday, with Tokyo climbing 0.4 percent, in part due to speculation the Bank of Japan will announce another round of stimulus after its policy meeting wraps up Thursday.

Investors from the Americas to Asia have been piling into safe-haven investments such as the yen, gold and bonds over the past week as a succession of opinion polls put Britain’s “Leave” camp leading ahead of the June 23 EU referendum.

However the latest poll, by ComRes, showed support for remaining at 46 percent and the pro-Brexit side on 45 percent.  This contrasts with a result from the same pollster just one month earlier in which the pro-remain side had an 11-point lead.

– Key figures around 2100 GMT –

New York – DOW: DOWN 0.2 percent at 17,640.17 (close)

New York – S&P 500: DOWN 0.2 percent at 2,071.50 (close)

New York – Nasdaq: DOWN 0.2 percent at 4,834.93 (close)

London – FTSE 100: UP 0.7 percent at 5,966.80 (close)

Frankfurt – DAX 30: UP 0.9 percent at 9,606.71 (close)

Paris – CAC 40: UP 1.0 percent at 4,171.58 (close)

EURO STOXX 50: UP 1.2 percent at 2,830.30 (close)

Tokyo – Nikkei 225: UP 0.4 percent at 15,919.58 (close)

Shanghai – Composite: UP 1.6 percent at 2,887.21 (close)

Hong Kong – Hang Seng: UP 0.4 percent at 20,467.52 (close)

Euro/dollar: UP at $1.1263 from $1.1208 late Tuesday

Pound/dollar: UP at $1.4212 from $1.4118

Dollar/yen: DOWN at 105.98 yen from 106.11 yen

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