Tuesday was a day of contrasts for the markets. Compared to Monday’s relief from a waning Brexit, the US stocks outlook underwent a radical change. On Tuesday, the euphoria of US stocks was hit by Federal Reserve Chair Janet Yellen’s comments on the economy. While deposing before the Senate, she spoke of the economy with a softened optimism, Bloomberg reported.
“Our cautious approach…remains appropriate,” Yellen said.
The comments let off tremors on S&P 500 Index as Yellen suggested slower growth to prevail for a longer time.
The US stocks outlook was one of “nervousness and cautiousness,” noted Phil Orlando, equity market strategist at Federated Investors while speaking to Fox Business.
“She is giving a dreary outlook,” said Andrew Brenner, head of international fixed income at National Alliance Capital Markets in New York.
He said there was no incentive for banks to lend and businesses are not seeing any scope in expanding as Fed is giving confusing and negative testimony.
In Europe, shares advanced with emerging-market equities. The pound held on to the gains of Monday. But euro fell after European Central Bank chief Mario Draghi said ECB will act if its inflation outlook is disturbed.
Brexit Swing
Earlier in the day, in contrast to US stocks outlook, slight gains were made by the US dollar, after a new poll said Britain’s vote on European Union membership has gained more followers for the “Leave” camp. The dollar index .DXY was up 0.25 percent up to 93.824 after staying flat, reports Reuters.
The convincing call of billionaire investor George Soros about the economic damage from Brexit resonated with the investors.
“Financial markets appear to be taking the view that the race may well already be run, which, given the twists and turns saw already in this campaign may well be extremely farsighted, or dangerously premature,” said Michael Hewson, chief strategist at CMC Markets in London.
Amidst, subdued US stocks outlook, Brent crude oil prices fell back to below $50 a barrel. It last traded at $49.97.
Yields on the low-risk US and German government bonds were held steady after rising on Monday. However, ebbing Brexit risk pulled down gold price, which fell 1.5 percent and brought XAU to $1,270 an ounce.
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