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Australian stock market expected to plunge amid Brexit fears Australian stock market expected to plunge amid Brexit fears
(2 months later)
Fears of economic instability in the eurozone are set to send shockwaves through the Australian stock market as the world sweats over whether Britain will bail on the EU.Fears of economic instability in the eurozone are set to send shockwaves through the Australian stock market as the world sweats over whether Britain will bail on the EU.
Polling before the Brexit referendum rocked European and US stocks on Friday, setting Australia up for a fall when the market reopens on Tuesday, according to AMP Capital’s chief economist, Shane Oliver.Polling before the Brexit referendum rocked European and US stocks on Friday, setting Australia up for a fall when the market reopens on Tuesday, according to AMP Capital’s chief economist, Shane Oliver.
Oliver said lingering uncertainty over the 23 June vote was set against a backdrop of weakened commodity prices, with oil and copper values both down.Oliver said lingering uncertainty over the 23 June vote was set against a backdrop of weakened commodity prices, with oil and copper values both down.
Related: Sterling and FTSE 100 floored by Brexit worries
He predicts the Australian market will open 60 points – or 1.1% – down after the Queen’s Birthday long weekend.He predicts the Australian market will open 60 points – or 1.1% – down after the Queen’s Birthday long weekend.
“Every time there’s evidence that Britain might leave the EU it leads to renewed fears about the stability of the eurozone, with concerns other countries may be tempted to hold a similar poll,” he said.“Every time there’s evidence that Britain might leave the EU it leads to renewed fears about the stability of the eurozone, with concerns other countries may be tempted to hold a similar poll,” he said.
“You start to see a retreat to safety where share markets go down, bond yields fall, and investors switch out of shares and into bonds. We’ve also seen a rise in the value of the US dollar, putting the squeeze on commodities.”“You start to see a retreat to safety where share markets go down, bond yields fall, and investors switch out of shares and into bonds. We’ve also seen a rise in the value of the US dollar, putting the squeeze on commodities.”
Oliver said all eyes would be on Chinese industrial production figures released on Monday, offering a glimpse into how the nation’s economy is tracking, before attention turns to local business confidence and employment figures later in the week.Oliver said all eyes would be on Chinese industrial production figures released on Monday, offering a glimpse into how the nation’s economy is tracking, before attention turns to local business confidence and employment figures later in the week.
Related: Australia moves to allow stock exchange operators to compete with ASX
He said the US Federal Reserve was not expected to tinker with interest rates at a mid-week meeting, but described the looming decision as the first in a series of “event risks” likely to reverberate in Australia.He said the US Federal Reserve was not expected to tinker with interest rates at a mid-week meeting, but described the looming decision as the first in a series of “event risks” likely to reverberate in Australia.
“There is the Fed’s decision in the week ahead, then the Brexit vote the week after, and Spanish election the week after that,” Oliver said. “And then of course we’ve got the Australian election in early July, and then the Republican and Democratic conventions in the US.”“There is the Fed’s decision in the week ahead, then the Brexit vote the week after, and Spanish election the week after that,” Oliver said. “And then of course we’ve got the Australian election in early July, and then the Republican and Democratic conventions in the US.”
Oliver said the Australian dollar had been locked on a rollercoaster ride in the past week which showed no sign of letting up. “Ultimately I suspect if fears over Brexit continue over the next week we’re likely to see downward pressure on the Aussie dollar,” he said.Oliver said the Australian dollar had been locked on a rollercoaster ride in the past week which showed no sign of letting up. “Ultimately I suspect if fears over Brexit continue over the next week we’re likely to see downward pressure on the Aussie dollar,” he said.