Crude Turns Lower Again as Brexit Worries Weigh on Markets

Crude oil returns to the red by late Wednesday morning, reversing a brief recovery, as stocks turn mixed.
By Keris Alison Lahiff ,

Crude oil returned to the red by late Wednesday morning, reversing a brief recovery, as stocks turned mixed. 

The S&P 500 was down 0.3%, the Dow Jones Industrial Average fell 0.4%, and the Nasdaq inched higher.

Crude oil hit a two-month low earlier on Wednesday as fears over how the United Kingdom's exit from the European Union will impact the global economy and demand for the commodity. Worries over the Brexit also pushed the pound to a 31-year low against the U.S. dollar, making foreign purchases of U.S.-produced oil more expensive.

West Texas Intermediate crude oil was down 1% to $46.12 a barrel by late morning Wednesday. The British pound fell 0.33% against the U.S. dollar, trading at $1.29.

"The majority of oil's recent slide can be attributed to the broader selloff seen in global markets amid concerns that the post-Brexit vote recovery had proceeded a bit quickly," said Robbie Fraser, commodity analyst at Schneider Electric. 

Gold prices were on a tear on Wednesday morning as investors sought safe-haven assets amid the uncertainty of the Brexit situation. Prices hit their highest in 28 months with spot gold trading around $1,371.40 an ounce.

Brexit fears returned in force on Tuesday after the Bank of England attempted to reassure investors that it had enough liquidity to ride out any outcome. Bank of England Gov. Mark Carney said that the central bank has the scope to deal with Article 50, which will kick off Britain's exit, when it is invoked.

The U.S. services sector continued to expand in June, according to the ISM Non-Manufacturing Index. The measure clocked in at 56.5 in June, remaining above the 50-level separating expansion from contraction. Analysts expected a reading of 53.3.

The U.S. trade gap in May widened on healthy demand for imports such as electronics and home goods. The trade deficit expanded to a three-month high of $41.1 billion in May from $37.4 billion in April. Economists had expected a reading of $42.2 billion.

The Federal Reserve will release the minutes from its June meeting on Wednesday afternoon. Several members turned more dovish in the face of global economic uncertainty during the meeting. The number of Fed officials who expect to see just one rate hike this year rose to six members in June, up from just one official in its previous April meeting.

"The dynamics underpinning Fed policy have been overtaken by the post-Brexit events, making the June FOMC minutes somewhat stale," said James Rossiter, vice president and senior global strategist at TD Securities. "Nevertheless, we expect the tone to be dovish, reflecting a greater awareness among Fed officials about the negative feedback loop from global events."

Walgreens Boots Alliance (WBA) - Get Report topped third-quarter estimates and bumped up the low-end of its full-year earnings forecast. The convenience and drugstore chain earned an adjusted $1.18 a share in the quarter, 4 cents above estimates. The company anticipates full-year earnings of at least $4.45 a share, a dime higher than its previous low-end target. Its acquisition of Rite Aid is expected to close in the second half of the year.

"Walgreens Boots Alliance delivered a solid beat and raise," said Jim Cramer, portfolio manager, and Jack Mohr, director of research at Action Alerts PLUS, which holds Walgreens. "We view the results as solid yet neutral."

Medivation's (MDVN) board of directors officially rejected a bid from Sanofi (SNY) - Get Report on Tuesday, but did enter a confidentiality pact with the French drugmaker as part of exploring a sale to other bidders. Pfizer reportedly has expressed interest in purchasing the biotech company.

United Continental (UAL) - Get Report was downgraded to neutral from outperform at Credit Suisse. The firm said consensus estimates appear too high given higher industry fuel costs. American Airlines (AAL) - Get Report was also downgraded at Credit Suisse to underperform from outperform. Analysts said industry unit revenue growth will likely continue to disappoint. 

Netflix (NFLX) - Get Report was downgraded to underperform from hold with an $80 price target, according to Jefferies. A new analyst covering the company expects flatter U.S. subscriber growth.  

Loading ...