Stocks Falter as Yen Soars Ahead of U.K. Vote
U.S. stocks slipped Monday following steep declines in Europe and Asia that came amid fresh jitters about the world’s economy.
New declines in government bond yields and a strengthening yen highlighted investor concerns about global growth, central bank policies and the impact of an upcoming U.K. vote on whether to remain in the European Union,
The Dow Jones Industrial Average fell 53 points, or 0.3%, to 17812. The S&P 500 declined 0.4%, and the Nasdaq Composite slipped 0.6%.
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Microsoft fell the most in the Dow industrials after the company agreed to buy LinkedIn for $26.2 billion. Microsoft shares lost 3%, while LinkedIn surged 47%.
The declines in U.S. indexes came after stocks in Europe and Asia fell sharply. The Stoxx Europe 600 dropped 1.8% to its lowest level since February.
Among investor concerns are polls suggesting a close-fought race in the U.K. referendum on June 23. Some recent surveys have suggested momentum is growing for the campaign to leave the EU, spurring concerns that a U.K. exit could trigger a period of uncertainty in financial markets and damage economic growth.
The European Union “is ultimately one of the more successful partnerships of all time—the thought of that changing is destabilizing,” said John DeClue, chief investment officer at the Private Client Reserve at U.S. Bank.
“People would start extrapolating to what else can happen in Europe if other countries leave,” Mr. DeClue added.
A poll published late Friday by ORB International put support for Britain leaving at 53%, against 47% for remaining—the survey excluded those who were undecided. The average of the past six polls puts each side on 50%, excluding voters who were undecided or didn’t know, according to NatCen Social Research, a nonpartisan social research agency, which has been tracking referendum polls.
Investors are concerned a U.K. exit could trigger a period of uncertainty in financial markets and damage economic growth in the region.
Investors are concerned a U.K. exit could trigger a period of uncertainty in financial markets and damage economic growth in the region.Photo: Reuters
Meanwhile, the Federal Reserve, Bank of Japan , and Bank of England all hold meetings this week, adding to market worries that have helped fuel a selloff in stocks and commodities that started late last week.
While investors are pricing in almost no chance of an interest-rate rise by the Fed on Wednesday, they will watch its economic projections and Chairwoman Janet Yellen ’s press conference closely to see if higher rates are likely in the coming months. A more hawkish tone could ramp up expectations for a rate increase in July or September and boost the dollar, analysts say.
U.S. government bond yields declined as prices rose. The yield on the benchmark 10-year note touched 1.610%, the lowest intraday level since Feb. 11, when the S&P 500 bottomed for the year. The yield was 1.639% Friday.
Earlier, Japan’s Nikkei Stock Average fell 3.5% as the yen surged to its highest levels against the euro and British pound since 2013. The yen tends to gain in times of market stress.
The dollar was last down 0.7% against the yen at ¥106.1630, while the British pound was down 0.2% against the dollar at £1.4230.
While the pound has lost more than 4% against the dollar this year, the yen has gained 13.6%. The continued surge of the yen will raise expectations that the Japanese central bank could announce some additional monetary easing, according to strategists at Bank of Tokyo-Mitsubishi.
Elsewhere, stocks in Hong Kong’s Hang Seng Index fell 2.5%, while the Shanghai Composite fell 3.2% after data showed industrial production in China held steady in May, but investment growth missed expectations.
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The International Monetary Fund warned over the weekend that soaring corporate debt could pose a potential systemic risk to China and the global economy. China’s corporate debt stands at approximately 145% of GDP, the lending agency said.
As investors sought assets perceived as safe, the 10-year Japanese government bond hit an all-time low yield of -0.160%, according to data from Tradeweb. 10-year German government bonds continued to inch closer to negative territory, yielding just 0.012%. Yields move inversely to prices.
Gold rose 0.8% to $1,285.90 an ounce, supported by a softer dollar and demand for havens. The metal has risen for the last two weeks, helping bring its price up over 21% so far this year. “You can print as many dollars as you want, but you can’t print gold,” said Suzanne Hutchins, portfolio manager at Newton Investment Management, who currently holds an elevated exposure to gold in her multiasset portfolio.
“There is a lot of uncertainty, and valuations [on equities] are high,” Ms. Hutchins said, noting the positioning of her portfolio is as cautious as its ever been, including during the financial turbulence of 2008.
Write to Riva Gold at
riva.gold@wsj.com and Aaron Kuriloff at
aaron.kuriloff@wsj.com