US open: Stocks fall as Brexit worries weigh on sentiment

US stocks opened lower on Tuesday as investors returned from the long holiday weekend and as concerns about the impact of Brexit resurfaced.

At 1437 BST, the Dow Jones Industrial Average fell 0.45%, the S&P 500 dropped 0.55% and the Nasdaq declined 0.54%.

At the same time, oil prices retreated, with West Texas Intermediate down 2.4% to $47.58 a barrel and Brent crude off 2.5% at $48.84 per barrel.

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.”

Across the pond, Britain weighed the Bank of England’s Financial Stability Report (FSR)on Tuesday.

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.

In currency markets, the pound fell to a fresh 31-year low against the US dollar – hitting $1.3073, 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.

Still to come, 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.

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. Shares in Chevron and Exxon dipped.

Shares of McDonald’s Corp. rose after the fast food chain won a lawsuit in the EU about other companies using the prefix “Mac” or “Mc”.

Goldman Sachs Group slumped after Oppenheimer cut the bank’s price target to $214 from $243.