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Brexit Looms Over Aussie Markets
World Economy

Brexit Looms Over Aussie Markets

Fears of economic instability in the eurozone are sending shockwaves through the Australian stock market, as the world sweats over whether Britain will bail on the European Union.
Polling ahead of the “Brexit” referendum rocked European and US stocks on Friday, setting Australia up for a fall when the market reopens on Tuesday, AMP Capital chief economist Shane Oliver said, AAP reported.
Oliver said lingering uncertainty over the June 23 poll was set against a backdrop of weakened commodity prices, with oil and copper values both down.
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.
“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.
He added that all eyes would be on Chinese industrial production figures to be 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.
Chain of Event Risks
He said the US Federal Reserve is 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.”
Oliver said the Aussie 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.

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