A negative Asia session has weighed on European markets this morning as concerns about slowing growth and rising oil prices has kept investors on the back foot.
Oil prices in particular have continued to edge back from their October lows on concerns that Saudi Arabia might use the oil price as a retaliatory measure on any sanctions that might come their way over the accusation about the disappearance of their journalist and US citizen Jamal Khashoggi.
This would be a high risk strategy for the Kingdom given it would hurt their allies and enemies alike, as well as tipping the global economy into recession, which in turn could well slash demand. Any attempt to weaponise oil prices, while effective in the short term, would be enormously counterproductive, probably hastening the move away from fossil fuels even further, and potentially prompting the US to open its Strategic Petroleum Reserve in an attempt to cap the upside.
The pound has come under pressure in Asia on the back of the weekend stalemate in the latest round of Brexit talks.
Any hopes that a draft Brexit deal might be reached at this week’s EU summit were dashed yesterday after Brexit Secretary Dominic Raab flew into and out of Brussels empty-handed on Sunday.
It would appear that for all of last week’s optimism that we might see a framework of a deal in the coming days, the weekend breakdown suggests that this week’s EU meeting is unlikely to make any further progress. For all the willingness to arrive at a deal the UK government’s problems would appear to be much closer to home, in the form of selling any sort of compromise on the future customs relationship as well as a solution to the Irish border domestically.
In Italy the Italian government will be submitting its latest budget plans to the European Commission against a backdrop of criticism from Brussels that their plans are in breach of spending limits, as the country comes under pressure to pare back its debt levels.
In company news BT has opened higher on weekend reports that hedge fund Greenlight Capital has acquired a stake in the company, with a view to splitting off its Openreach division.
Another UK retailer is in the spotlight today after Superdry (LON:SDRY) warned this morning that its profits would be £10m less than expected due to the long hot summer in all of its markets, which it would appear has put customers off buying their winter wardrobes. As a result the shares have plunged on the open to their lowest levels since March 2015.
The best performers appear to be gold miners Randgold Resources (LON:RRS) and Fresnillo (LON:FRES) as gold prices hit their highest levels since July on the back of the rising levels of uncertainty weighing on equity markets.
US retailers are likely to be in focus after Sears (NASDAQ:SHLD), after a long fight for survival finally lost its battle with a changing retail environment, and after a 125 year history, became the latest in a long line of big name retailers to file for Chapter 11 bankruptcy, under the weight of more than $10bn of debts.
As far as US consumers go they have proved to be fairly resilient in recent months despite the difficulties being faced by the traditional bricks and mortar sector. US retail sales for September are expected to show a rise of 0.6%, which would be the seventh successive monthly gain, and an improvement on the 0.1% gain seen in August.
Dow Jones is expected to open 105 points lower at 25,235
S&P500 is expected to open 12 points lower at 2,755
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