Markets tread water ahead of the US Fed meeting and bearish sentiment about Grexit
Investors are awaiting the outcome of the US Federal Reserve meeting that got underway today.
Markets and indices
On Wall Street on Monday (June 16th), stocks fell again as concerns over a Greek default continued following the breakdown in negotiations over the weekend. The Dow fell 107.67 points, or 0.6 percent, to 17,791.17, the S&P 500 lost 9.68 points, or 0.46 percent, to 2,084.43 and the Nasdaq dropped 21.13 points, or 0.42 percent, to 5,029.97.
Asian indices were also weighed down by the continuing Greek uncertainty, as well as the negative cues from Wall Street. Concerns about a more widespread outbreak of the MERS virus also affected Asian market sentiment. The Straits Times Index ended 0.9 per cent lower, while the Hang Seng, Nikkei and Kospi were also down 1.1 per cent, 0.6 per cent and 0.7 per cent respectively.
Commodities and currency
Gold prices were higher, buoyed by the weaker US Dollar ahead of this week’s Fed policy meetings. Spot gold was up 0.5 per cent to US$1,186.60 (£759.39) an ounce, while US gold futures for August delivery climbed US$6.60 (£4.22) an ounce to US$1,185.80 (£758.79).
Oil also rose on the back of supply warnings including a major tropical storm due to hit the coast of oil-producing Texas. US crude futures was up around 50 cents at US$60.05 (£38.41) per barrel at 0700 GMT, while Brent also increased up 22 cents to US$64.17 (£41.05) per barrel, reported Reuters.
The dollar fell 0.2 per cent against a basket of major currencies, resulting in dollar-denominated gold being cheaper for holders of other currencies. A decision to increase US interest rates would likely boost the dollar and thereby reduce demand for non-interest-paying gold reported Sky News.
Company news
Warren Buffet’s Berkshire Hathaway (NYSE: BRK-A) has formed a strategic alliance with Insurance Australia Group (ASX: IAG), acquiring a 3.7 per cent stake in the insurer via a US$500m (£320m) placement. The partnership will see Berkshire acquire circa 20 per cent of the insurer’s gross written premium and pay 20 per cent of its claims for the next decade.
Warren Buffet said in a company statement that the strategic partnership would help the group fast track its exposure to Asia. IAG’s CEO cited the reduction and diversification of IAG’s capital as key benefits for investors and customers. IAG was up 4.31 per cent to $5.81 (£2.88) at market close.