US pre-open: Stocks seen weaker as Brexit woes resurface

US futures pointed to a weaker open on Wall Street as concerns about the impact of Brexit returned to the fore.

At 1130 BST, Dow Jones Industrial Average futures were down 0.5%, while S&P 500 and Nasdaq futures were 0.6% lower.

Oanda’s Craig Erlam said: “Nothing has necessarily hit the fan as of yet but there are a growing number of negative reports circulating off the back of the UK’s decision to leave the EU and this appears to be starting to weigh on sentiment.”

“US traders return to their desks on Tuesday, at the start of what is likely to be quite a busy week once again. Brexit aside, we’ll get the minutes from the June Fed meeting on Wednesday followed by the latest jobs report on Friday which should ensure markets remain quite volatile. The Fed is now unlikely to consider rate hikes in the coming months as it analyses the impact of Brexit but the minutes could still provide insight into how close they were to raising and how much of a deterrent the UK’s decision could be. For another hike to remain on the table this year, the jobs data will have to remain strong overall and rebound from last month’s disappointment.”

On Tuesday, investors will eye the release of US factory orders at 1500 BST and a speech by New York Fed President William Dudley at 1930 BST.

In Europe, the main regional equity indices were trading more than 1% lower amid Brexit worries and as investors digested headlines from the Bank of England’s Financial Stability Report (FSR).

The BoE loosened UK banks’ requirements to hold extra capital and warned that risks from the country's Brexit vote had already started to "crystallise".

In its twice-yearly report, it looked to encourage banks to keep lending by trimming the countercyclical capital buffer rate to 0% from 0.5% with immediate effect and until at least June 2017.

It said the cuts to capital buffers will raise banks’ capacity for lending to UK households and businesses by up to £150bn.

The BoE, which in March had said the capital buffer would rise to 0.5%, said it expected banks not to increase dividends and other payments, such as bonuses, as a result of the reduced capital buffer.

In currency markets, the pound fell to a fresh 31-year low against the US dollar – hitting $1.3114, intraday – amid ongoing concerns about the fallout from Brexit and after data showed UK services expansion weakened in June to match the 38-year low reached in April, amid a darkening outlook.

The Markit/CIPS UK services purchasing managers’ index fell to 52.3 from 53.5 in May, missing economists’ expectations for a reading of 52.7. Still, sterling pared losses following the release of the FSR.

At the same time, oil prices retreat, with West Texas Intermediate down 2.8% to $47.63 a barrel and Brent crude off 2.2% at $48.98.

On the corporate front, Chevron Corp, Exxon Mobil Corp and their partners said on Tuesday that they had committed to a $36.8bn oil expansion project in Kazakhstan.