Traders May Shun Equities Amid Renewed Brexit Fears

(RTTNews) - The major U.S. index futures are pointing to a lower opening on Wednesday, with sentiment reflecting risk aversion founded upon on Brexit fears.  With some insurers in the U.K. freezing withdrawals from their real estate funds, the prospects look bleak. The uncertainty surrounding fallout of an eventual Brexit is playing out in the minds of investors and sending them scurrying towards safe havens. The dollar is mixed but most commodities are lower.

Domestically, the trade balance report released short while ago showed widening of the U.S. trade deficit. Meanwhile, Germany reported an unexpected stagnation in factory orders. Traders in the U.S. market may also track the results of a service sector activity survey and the minutes of the June FOMC meeting.   U.S. stocks declined on Tuesday amid fears about the potential fallout of an eventual Brexit and worries concerning the Italian banking sector.     The major averages opened lower and moved roughly sideways in a range for the rest of the session. The Dow Industrials fell 108.75 points or 0.61 percent before ending at 17,841, the S&P 500 Index closed 14.40 points or 0.68 percent lower at 2,089 and the Nasdaq Composite ended at 4,823, down 39.67 points or 0.82 percent.    Eighteen of the 30 Dow components settled the session lower, with JP Morgan Chase (JPM), United Technologies (UTX), Goldman Sachs (GS), DuPont (DD), Caterpillar (CAT), Boeing (BA) and American Express (AXP) among the worst hit.     Among the sectors, energy, transportation, basic material, semiconductor, computer hardware and financial stocks declined notably, but gold stocks rallied.    On the economic front, the Commerce Department reported that factory orders fell 1 percent month-over-month in May, in line with expectations, following a downwardly revised 1.8 percent increase in April. The previously published durable goods orders data was revised downward to show a 2.3 percent drop compared to the 2.2 percent decline reported initially.     Currency, Commodity Markets    Crude oil futures for August delivery are receding $0.55 to $46.05 a barrel after slumping $2.39 to $46.60 a barrel in the previous session. Meanwhile, an ounce of gold for August delivery is currently trading at $1,371.90, up $13.20 from the previous session's close of $1,358.70. On Tuesday, gold climbed $19.70.     On the currency front, the U.S. dollar is trading at 100.75 yen compared to the 101.74 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.1083 compared to yesterday's $1.1076.    Asia    The Asian markets that were open for trading ended mostly lower, as the negative close on Wall Street overnight and rising risk aversion kept sentiment subdued. The Indian, Indonesian, Malaysian and Singaporean markets were closed for a public holiday.     Japanese stocks pulled back sharply as the yen appreciated in the wake of risk aversion. The Nikkei 225 Index opened lower and declined steadily till the mid-session. Despite trimming some of the losses over the course of the afternoon, the index ended notably lower, falling 290.34 points or 1.85 percent to 15,379.    Export, retail, real estate, pharma, chemical, resource, financial and utility stocks all faced selling pressure. However, food and some rail utility stocks gained ground.    Australia's All Ordinaries Index languished below the unchanged line throughout the session before ending down 28.10 points or 0.53 percent at 5,285. Material, energy, financial and IT stocks fell steeply but telecom and utility stocks gained ground.    Hong Kong's Hang Seng Index ended at 20,495, down 255.43 points or 1.23 percent, while China's Shanghai Composite Index closed 10.90 points or 0.36 percent higher at 3,017.    Europe    European stocks are continuing their lackluster run, with the French and German markets notably lower, while the U.K. Market, which held up modestly amid volatility in early trading, have given back its gains and are currently down notably.

The pound continues to be pounded and is trading at fresh 31-year lows, reflecting worries concerning the domestic economy in the eventuality of a Brexit.    In major corporate news, U.K. insurer Aviva said it plans to raise its dividend payout ratio to 50 percent in 2017 and targets mid-single digit growth in IFRS operating profit in the medium term. Melrose announced a deal to buy Nortek for $86 per share in cash, valuing the latter's issued share capital at $1.44 billion.    On the economic front, the German Federal Statistical Office reported that factory orders remained unchanged in May compared to the previous month following a revised 1.9 percent drop in April. Economists expected a 1 percent increase in factory orders. Domestic orders fell 1.9 percent, but foreign orders rose 1.4 percent.    German construction activity expanded at the weakest pace in ten months in June, the results of a survey by Markit Economics showed. The construction PMI fell to 50.4 in June from 52.7 in May.     A report released by the British Retail Consortium showed that shop prices in the U.K. fell 2 percent year-over-year in June following the 1.8 percent drop in May. Food prices were down 0.8 percent.    U.S. Economic Reports    Primarily reflecting a jump in the value of imports, the Commerce Department released a report on Wednesday showing that the U.S. trade deficit widened by more than expected in the month of May.

The report said the trade deficit widened to $41.1 billion in May from $37.4 billion in April. Economists had expected the deficit to widen to $40.0 billion.

Federal Reserve Governor Daniel Tarullo is scheduled to take part in a conversation about the intersection of regulation and monetary policy in Washington at 9 am ET.    Markit is set to publish the final estimate of its U.S. service sector PMI for June at 9:45 am ET. In May, the index was at 51.3.    Shortly after, at 10 am ET, the Institute for Supply Management is due to release the results of its non-manufacturing survey. The consensus estimate calls for an increase in the non-manufacturing index to 53.3 in June from 52.9 in May.    In May, the non-manufacturing index fell to 52.9 from 55.7 in April, while economists expected a reading of 55.5. The index indicated the slowest rate of expansion since January 2014. The employment index fell 3.3 points to 49.7. The new orders index slid 5.7 points but remained well above the '50' cut-off mark.    The Federal Reserve is due to release the minutes of its June FOMC meeting at 2 pm ET. The central bank stood pat at the meeting and Fed Chair Janet Yellen sounded dovish in her press briefing that followed the meeting, citing global risks.    Stocks in Focus    Walgreen Boots (WBA) raised the low end of its fiscal year 2016 adjusted earnings per share guidance by 10 cents per share, with the company noting that the guidance assumes contribution from Rite Aid acquisition. The company's third quarter adjusted earnings per share beat estimates but its revenues were shy of estimates.