Oct 15, 2018, by Lorcan Roche Kelly
Hopes Friday’s bounce in U.S. equities would lead to a positive start to the trading week were dashed in the Asia session. Overnight, the MSCI Asia Pacific Index dropped 1.1 percent with China’s Shanghai Composite Index closing at the weakest level since November 2014. In Europe, the Stoxx 600 Index was 0.2 percent lower at 5:45 a.m. Eastern Time as the region’s markets continued to be driven by global risk-off sentiment. S&P 500 futures pointed to a loss at the open, the 10-year yield was at 3.150 percent and gold was above $1,230 an ounce for the first time since July.
The Trump administration is running out of patience with Saudi Arabia’s denials of any involvement with the disappearance of journalist Jamal Khashoggi within its consulate in Turkey. While President Donald Trump is reluctant to cancel vast arms sales to the country, a range of other diplomatic punishments are under discussion, according to officials who did not want to be identified. Authorities in Riyadh said they would respond to any punitive measures with “stronger” ones. Saudi Arabia’s “Davos in the Desert” appears to be cratering under the weight of worsening U.S. relations with JPMorgan Chase & Co. CEO Jamie Dimon the latest corporate leader to drop out of the event.
Crude futures, which had been retreating from recent highs, is rising again this morning. With supply already squeezed by U.S. sanctions against Iran, the market is attempting to price-in American action against the world’s largest exporter. A barrel of Brent crude for December delivery was trading at $81.37 by 5:45 a.m., with investors fretting Riyadh might use oil supplies as a political weapon in the event the West penalizes the Kingdom.
For a brief moment yesterday it seemed that a breakthrough might be possible in talks forging an agreement on the U.K.’s exit from the European Union, but a meeting between Brexit Secretary Dominic Raab and his EU counterpart Michel Barnier in Brussels ended with key issues remaining unresolved – yet again. There will be no further attempts to resolve the impasse ahead of a European leaders summit in the Belgian capital on Wednesday. The pound fell in the aftermath of the failure to reach an agreement.
At 8:30 a.m., U.S. retail sales numbers for September are released, with expectations for 0.6 percent growth in the headline figure. October Empire manufacturing data is due at the same time. In earnings, Bank of America Corp. and Charles Schwab Corp. both report before the bell.