Global stocks down ahead of Fed meeting

The pound lost 0.5 percent versus the euro Monday, following a 0.8 percent decline. “Momentum appears to be stalling after a solid start to 2016”, said Mizuho Bank in a report.

Asia markets fell on Tuesday, extending Monday’s losses, following a lower finish in US stocks as investors looked ahead to central bank meetings in the USA and Japan. If there was a good chance of an European Union exit happening, equities should be 5 percent or more lower.

It is tempting to scour Japan’s experience for clues to the fate of today’s extraordinarily low rate environment – and if Japan’s road map is any guide to the future, US, UK and German yields can likely fall even further than they already have. The terrible mixture of falling oil prices, concerns over slowing global and Brexit developments could ensure that the FTSE100 remains depressed for an extended period. The debate now among traders is whether the BoJ will take policy steps on Thursday aimed at weakening the currency, when a vote for a Brexit next week would be expected to drive more buying of the yen globally as a safe haven for capital.

Sterling also notched a three-year low against the yen on Monday, and was last down 0.3 percent at 151.11 yen GBPJPY=.

Markets are on edge as the United States and Japanese central banks meet this week, with investors worrying about global growth and the possible impact of Britain quitting the European Union, as polls showed an exit is a real possibility. “However, we still believe that the Bank will respond to the recent moderation in underlying inflation by stepping up the pace of monetary easing, probably next month”, writes the consultancy’s Japan economist Marcel Thieliant.

Major exporters of the country also slipped due to a rising yen, as a stronger currency dilutes overseas earnings when converted back into local currency.

Australian markets suffered, on the first day after the Queen’s Birthday commemorations, weighed by a 2.2% loss in the financials sub-index, which accounts for almost half of the broader index. CSI 300, China’s blue-chip index, also fell 3.09%, shedding 98 points.

Volume grew to 1,976 million shares from Monday’s 1,876 million shares.

Chinese data released Monday added to evidence that the world’s second-largest economy is stabilising. Industrial output in May rose 6% year-over -year (YoY) same as in prior month. The recent data suggest a downside risk to the economy as growth is under pressure. With speculation gripping the market, traders remained on sidelines and chose to wait for the government’s support.

Miner BHP Billiton fell 2.9 per cent, despite some good news after a court in Brazil dismissed a civil lawsuit against Samarco – co-owned by BHP Billiton and Vale – over the mine disaster in November past year.

As low bond yields cast a long shadow over fixed income markets, investors are struggling to balance risk and return.