US index futures suggest that the S&P 500 will commence its session with a six-point decline. Asian markets have had a markedly bad start to the week with the Shanghai Composite falling 2 %, Hong Kong’s Hang Seng down 2.7 % and Japan’s Nikkei 225 diving to 3.5 %. With an upsurge of the yen, which is well known for strengthening during times of economic stress, the US dollar is down 0.9 %, nearly reaching its lowest level since the end of 2014, as traders busily seek out haven assets.

According to Timothy Faraday, Chief Economist at Global Associates, “There is a real risk that China will not reach its target figure for growth of 6.5 %, while investors await a decision whether Chinese stocks should be included in emerging markets benchmarks. Should this happen, it could affect the way asset managers allocate trillions of dollars of funds.”

Investors have recently become risk averse due to record low bond yields as a direct result of central banks’ negative interest rate policies and asset purchase programs, which are warping the financial system. Both the European Central Bank and the Bank of Japan have introduced these policies and are purchasing fixed income products to bolster economic growth. However, this has pushed benchmark government bond yields to record lows.

As Global Associates have commented, the dollar index has dropped 0.1 %, which is boosting gold which has gained by $8 an ounce. Adding to gold’s appeal is ambiguity hanging over the UK potentially leaving the EU. The growth of support for the Leave campaign has rattled currency markets. The pound is down 0.5 %, the lowest for eight weeks, while the cost of insuring against sterling/dollar volatility has jumped to 28 %, not far off the rate at the peak of the financial crisis.
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