Volatility was subdued in recent trading sessions as US banks were closed for the Fourth of July holiday. The Dow 30 index closed 19.38 points up to 17,949.37 (+0.11%), the S&P 500 index was up 2.31 points to 2,101.17 (+0.11%), and the Nasdaq advanced 19.89 points to 4,862.57 (+0.41%). The S&P 500 VIX, which is considered a gauge of market uncertainty, edged 0.86 points down to 14.77 (-5.50%) to show that risk appetite was still present.
Over in Europe, equity indices closed in the red as risk aversion appeared to return to the markets. Data from the UK was weaker than expected, with the construction PMI showing industry contraction, and the euro zone Sentix investor confidence reflected a sharp drop from 9.9 to 1.7, likely in reaction to the Brexit.
The German DAX slid 67.03 points down to 9,709.09 (-0.69%), the French CAC 40 was down 39.10 points to 4,234.86 (-0.91%), and the Euro Stoxx 50 was down 16.78 points to 2,866.28 (-0.58%). In the UK, the FTSE 100 fell 55.57 points to 6,522.26 (-0.84%).
Asian markets also retreating
Asian equities are looking mixed so far, but it looks like the downbeat Australian retail sales and trade balance have started to weigh on risk-taking. The S&P ASX 200 index is down 47.18 points to 5,234.60 (-0.89%) and the Nikkei is down 120.04 points to 15,655.76 (-0.76%). Australian retail sales rose 0.2% versus the projected 0.3% gain while the trade deficit widened to 2.22 billion AUD versus the projected 1.72 billion AUD shortfall. The previous month’s trade balance was also downgraded.
Traders are now awaiting the interest rate decision of the Reserve Bank of Australia, with some expecting an interest rate cut from 1.75% to 1.50%. Political uncertainty is also present at the moment, as the vote counting from the federal elections suggested the possibility of a hung parliament or a coalition government.
UK services PMI data is due in the London trading session and might also influence market sentiment, as this industry accounts for a large part of UK economic activity. Traders are expecting to see a drop from 53.5 to 53.1, although another much weaker than expected figure could lead to sharper losses for European equities. The New Zealand GDT auction is scheduled in the next Asian trading session and a continued climb in dairy prices could keep commodities supported.