-Central banks: The Federal Reserve held rates unchanged yesterday, the Bank of Japan held rates unchanged overnight, the Swiss National Bank held rates unchanged this morning. While all of this sounds very boring, markets are moving this morning on the comments that accompanied the decisions, particularly those made by Fed chair Janet Yellen in her press conference where she suggested that interest rates may remain lower for longer. Market-implied odds of a rate hike by the Fed at its July meeting have now dropped to 5.9 percent and do not rise higher than 50 percent at all on the forecast horizon through the January 2017 meeting.
-How low can they go?: Global developed market bonds continue to rally, with Japanese and German government bond yields falling to record lows. This morning, the Swiss 30-year bond yield flirted with negative territory, while the same tenor U.S. Treasury yield fell to the lowest in 16 months. In the U.K., with the referendum on EU membership just a week away, gilt yields reached an all-time low. One of the few places where yields are rising is in the euro periphery as risks from the Brexit vote mean investors are dusting off their euro crisis playbooks.
-Brexit risks: The chances of Britain voting to leave the European Union continue to rise, with another poll published this morning putting the ‘leave’ side well ahead. The pound continues to slide, dropping toward a two-month low this morning as the risk of a Brexit weighs ahead of the Bank of England decision. The governor of the bank, Mark Carney has written a robust defense of his comments about the impact of a decision to leave the EU on the U.K. economy following accusations that he was breaking government rules by speaking publicly on the matter. Despite the moves in the pound and the widespread commentary on the issue, some traders are not buying into the hype.
-Markets slip: Yesterday’s rally in Asia was undone overnight as the MSCI Asia Pacific Index dropped 1.1 percent with Japan’s Topix index sinking 2.8 percent and the yen rallying through 104 to the dollar following the Bank of Japan’s decision not to add new stimulus at its meeting. In Europe, the Stoxx 600 Index was 0.6 percent lower at 6:13 a.m. ET, with banks getting hit hardest and Deutsche Bank AG dropping to a record low. S&P 500 futures were 0.7 percent lower.
-Central banks take center stage: Investors are watching a flurry of central bank announcements from the U.S., Japan and Switzerland. The Federal Reserve said Wednesday it would not raise interest rates and cut its forecast for U.S. economic growth in 2016 to 2%, down from 2.2%. Then the Bank of Japan refrained from announcing further stimulus measures for the economy, which caused the yen to surge. One dollar is now worth 104 yen, a high the Japanese currency has not seen since 2014. This pushed the benchmark Nikkei index down by 3%. The Swiss National Bank kept its interest rates steady and reiterated that the Swiss franc was overvalued.
-Flight to safety: Uncertainty over the global economy, and the outcome of next week’s EU referendum in the U.K., is prompting investors to protect their assets in safe-haven investments right now. That’s pushing up the price of gold by 2% to about $1,310 per ounce. And bond prices in nations with solid credit ratings are spiking, pushing interest rates down. Yields on U.S. 10-year government bonds are now at their lowest level since 2012, and yields on German 10-year bonds are back in negative territory. Buyers of these assets are essentially taking a loss just to hold them.
-Earnings: Kroger (KR) and Rite Aid (RAD) will post quarterly earnings updates ahead of the opening bell. After the close, investors will hear from Oracle (ORCL, Tech30) and gun maker Smith & Wesson (SWHC). Investors will be waiting to see if Smith & Wesson executives say anything about an increase in demand for guns following the Orlando massacre. Gun sales in the U.S. tend to spike after high-profile shootings as people worry that stricter gun control laws could follow.
-Brexit vote in one week: The upcoming U.K. «Brexit» referendum is still at the top of traders’ minds. The British public is set to decide on June 23 whether the country should leave the European Union. Many experts and world leaders have predicted that a vote to leave would hurt trade and investment, trigger a recession, kill jobs, slam the pound and cause house prices to fall. But so-called «Brexiteers» predict that leaving the bloc of 28 member nations could ultimately boost the economy and allow the country’s leaders to make their own regulations without meddling from outsiders.
-Market recap: U.S. stocks have fallen for five straight trading days. The Dow Jones industrial average has lost 2% over this period. The S&P 500 has sunk by 2.3%. The Nasdaq has suffered even more, dropping by 2.8%.