Brexit vote keeps investors on edge

Tue Jun 21, 2016 6:41pm EDT
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By Edward Krudy

NEW YORK (Reuters) - Stock markets edged higher on Tuesday while sterling reversed gains after hitting a more than 5-1/2-month high earlier in the day as polls and surveys showed the United Kingdom's vote on leaving the EU remains on a knife-edge.

Mixed trading across asset classes pointed to uneasiness in markets, investors said, and came after Monday's dramatic surge in "risk assets," driven by polls showing the chance of the United Kingdom leaving the EU appearing to lessen.

Oil prices briefly dropped back below $50 per barrel and ended a two-day rally as the latest opinion polls indicated Thursday's referendum could go either way. But gold and the yen, safe-haven assets that often rally when investors are uncertain, continued to head lower.

Fed Chair Janet Yellen said global risks and a U.S. hiring slowdown warrant a cautious approach to raising interest rates. Her comments before the Senate Banking Committee seemed to signal no pressing need for the Fed to raise rates.

"Brexit has really dominated everything for the past several weeks," said Richard Gilhooly, head of rates strategy, at CIBC World Markets in New York. "The shift in the Fed's stance and forecasts have nothing to do with Brexit. There is something problematic with productivity and long-term growth as some economists have suggested." 

The dollar strengthened against a basket of major currencies .DXY, mainly due to a 0.9 percent surge against the yen, which has retreated this week on indications the campaign for Britain to stay in the EU has regained momentum.

The Dow Jones industrial average .DJI rose 24.86 points, or 0.14 percent, to 17,829.73, the S&P 500 .SPX gained 5.65 points, or 0.27 percent, to 2,088.9 and the Nasdaq Composite .IXIC added 6.55 points, or 0.14 percent, to 4,843.76.

The MSCI's all-country world stock index .MIWD00000PUS edged up 0.2 percent after surging 1.7 percent on Monday.   Continued...

Wads of British Pound Sterling banknotes are stacked in piles at the GSA Austria (Money Service Austria) company's headquarters in Vienna July 22, 2013.  REUTERS/Leonhard Foeger/File Photo