"The euro and central and eastern European currencies are
vulnerable, while risk assets, in general, are expected to weaken on a
Brexit victory," he said.
Asian stocks fell the most in more than four months and the Japanese yen jumped on Monday as risky assets took a hammering before key central bank meetings this week and while investors await Britain's stay-or-go referendum on European Union membership.
Further
sapping confidence over recent days has been a steady drip of economic
data that has highlighted an underpowered world economy despite years of
heavy stimulus delivered by central banks.
European
shares are set to open lower with spreadbetters expecting Britain's
FTSE 100 to open down 0.4 percent, Germany's DAX to slip 0.8 percent,
and France's CAC 40 to fall 0.9 percent.
The U.S.
Federal Reserve, Bank of England, Swiss National Bank and the Bank of
Japan will meet this week. All are expected to hold monetary policy
steady against a backdrop of caution heightened by the global impact of a
possible Brexit.
MSCI's broadest index of
Asia-Pacific shares outside Japan fell 1.7 percent, its biggest daily
drop since Feb. 11. It is down almost 4 percent in the last two
sessions.
Japanese stocks led regional losses with the benchmark index falling 3.2 percent in choppy trade.
"There
are many long-term investors who have given up on Japanese stocks as
there are no structural reforms being delivered. Meanwhile, monetary
policy decisions only have short-term effects," said Michiro Naito, executive director at equity derivatives at JPMorgan who recently visited Asian investors.
Net
selling by foreign investors from January through May was roughly 4.5
trillion yen ($42.07 billion) in Japanese cash equities, according to
exchange data, a stark turn from net purchases of about 2.83 trillion
yen in the same period last year.
Investors hunting for bright spots in Asia this year in China and India have also been disappointed by poor data.
Latest
data showed China's fixed-asset investment growth cooling to 9.6
percent in January-May from the same period a year earlier, below market
expectations, while the statistics bureau said downward pressures still
exist in the economy.
"We have downgraded the
China market because of the debt problems and we think by the third
quarter, growth numbers would start reflecting a broader slowdown," said Francis Cheung, head of China and Hong Kong strategy at CLSA.
Reflecting
the bearish sentiment, S&P e-mini futures were down 0.4 percent in
Asia after Wall Street marked steep losses on Friday. A shooting spree
in Orlando, Florida, in which 50 people were killed and similar number
wounded only added to the pessimism.
In currency
markets, the mood was one of risk aversion with the Japanese yen rising
to a five-week high against the dollar. The yen was trading at 105.88
per dollar, its lowest since May. 3.
The British pound has whipsawed in recent weeks on news related to the June 23 referendum on its EU membership.
Early
on Monday, the pound fell to as low as 150.63 yen, its lowest level
since August 2013 while the euro fell to 119.16 yen, a level last seen
in Feb. 2013.
Two polls on Saturday showed British voters were still divided on whether to stay or go.
"Ahead of the referendum, many look for sterling to underperform and the yen and Swiss franc to outperform," Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said in a note.
"The
euro and central and eastern European currencies are vulnerable, while
risk assets, in general, are expected to weaken on a Brexit victory," he said.
Crude
oil futures extended losses after falling 3 percent on Friday,
pressured by the stronger dollar and data showing the U.S. oil drilling
rig count rose for the second week in row. [O/R]
U.S. crude futures fell 1.1 percent to $48.51 a barrel, while Brent slipped 1 percent to $50.03.
Government
bonds benefited with the yield on the 10-year Japanese bond marking yet
another record low. Yields on JGBs with maturities out to 15-years were
well into negative territory.
Gold rose, hovering close to three-week highs. Spot gold added 0.1 percent to $1,275.16 an ounce.
Posts
0 Comments