Asia Stocks Prepare For More Volatility
June 26 2016 - 09:10PM
Dow Jones News
SYDNEY—Asia share markets are bracing for more uncertainty amid
ongoing fallout from the U.K.'s decision Friday to depart the
European Union.
On Friday, the Dow Jones Industrial Average dropped 610.32
points, or 3.39%, to 17400.75, wiping out its year-to-date gains as
Britons voted to walk away from the EU, a move that has already had
massive political repercussions, with U.K. Prime Minister David
Cameron announcing he will resign.
On Friday, the S&P 500 index fell 3.59%, dragged lower by
bank stocks, and the tech-heavy Nasdaq Composite shed 4.12%.
Australia was one of several markets to see billions of dollars of
value wiped out on Friday, with the S&P/ASX 200 losing 3.2%, to
5113.2.
The world's top central bankers will be a key focus in the day
ahead as they gather at a three-day European Central Bank summit in
Sintra, Portugal. Janet Yellen of the Federal Reserve, Mark Carney
of the Bank of England and Mario Draghi of the European Central
Bank are among the central bank leaders scheduled to speak.
Grant Williamson, a New Zealand-based investment adviser at
Hamilton Hindin Greene, expects markets to be in for another
decline.
"There is obviously going to be a continuation of a selloff this
morning on the New Zealand market in reaction to Wall Street and
European markets, which did get hit pretty hard on Friday," Mr.
Williamson said. "I think volatility is going to be the word of the
week."
However, Matt Felsman, a private wealth adviser at APP
Securities, said investors need to put Friday's falls in
perspective. Mr. Felsman said he expects trading to remain choppy
on Monday, adding he believes "cooler heads will prevail" in
upcoming trading sessions.
"We were very lucky to have the weekend to digest, most press is
now suggesting Friday's plunge is creating a buying opportunity,"
Mr. Felsman said.
Currency markets are set to remain volatile with attention
focused on the yen in Asia after the haven currency rallied to its
highest levels since November 2013 on Friday.
The sharp gain in the yen have prompted speculation Japanese
authorities will launch market intervention to contain the
currency's gains.
A senior Japanese ruling-party lawmaker issued a stern warning
Sunday about the soaring yen, saying the government shouldn't
hesitate to undertake direct intervention in the currency market if
that is deemed necessary.
"Sharp, speculation-driven movement has a very bad impact,"
Tomomi Inada, policy chief of the ruling Liberal Democratic Party,
said during a program on Japan's national broadcaster NHK. "We
shouldn't hesitate to undertake countermeasures if necessary,
including intervention."
Emerging-market currencies were among the hardest hit by
Friday's market rout. The U.S. dollar jumped 4.5% against the South
African rand, 3.8% against the Mexican peso, and 3.7% against the
Hungarian forint.
More broadly, economist are warning Brexit will unleash fresh
concerns about disinflation in the world economy and heighten
growth risks.
Morgan Stanley said it now has a target for Australia's
benchmark S&P/ASX200 of 4,800, down from its close on Friday
above 5,100, citing a "risk-off shock and heightened awareness of
deflationary and growth risk."
"Our U.K .economists see the U.K. referendum decision leading to
protracted political and economic uncertainty, which will weigh on
growth over the next two years," said Chris Nicol, strategist at
Morgan Stanley.
Write to James Glynn at james.glynn@wsj.com and Kate Geenty at
kate.geenty@wsj.com
(END) Dow Jones Newswires
June 26, 2016 20:55 ET (00:55 GMT)
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