Another sharp drop in Chinese stocks fed through to a weaker stock market open in the UK and Europe with futures pointing to a lower open on Wall Street. Data showing a monthly rise in house prices could hamper the ability of the People’s Bank of China to cut interest rates for risk of blowing air back into a housing bubble.
The Shanghai Composite fell as much as 6% with concerns for the Chinese economy leading to a new six year low in copper prices coupled with another slide in the price of crude oil.
The commodity slump weighed on the FTSE 100 in early trading with losses extended by the rising threat of higher interest rates after a surprise jump in UK inflation. Commodities-focused engineering company Weir Group (LONDON:WEIR) and BHP Billiton (LONDON:BLT) were top fallers while Shire PLC (LONDON:SHP) was one of only a handful of gainers surrounding speculation over its bid for rival Baxalta.
Typical of the difficulty within the energy sector, shares of Scottish oil and gas explorer Cairn Energy Plc (LONDON:CNE) lost over 3% taking them to near five month lows after poorly received earnings.
UK inflation fell less than expected in July while core prices that strip out the cost of energy jumped to 1.2%, the highest annual rise since February. The pound rallied because if the Bank of England is truly looking through the fall in energy prices, this is a significant rise in price pressures and puts a 2015 rate hike back on the table.
Top flight US retailers Wal-Mart (NYSE:WMT), Home Depot Inc (NYSE:HD) and TJX Companies Inc (NYSE:TJX) all report earnings on Tuesday.
Wal-Mart is expected to have earned $1.12 per share in the second quarter, down from $1.21 a year earlier while revenue is expected to fall to $119.8bn down from $120.1bn. US domestic consumption remains mixed and Wal-Mart recently raised its own minimum wage so the earnings in Q2 probably won’t blow the roof off. There is an outside chance that Wal-Mart raises the outlook for Q3, hoping for a pickup in retail sales and a potential drop in import costs given the devaluation of the Chinese yuan.
Futures suggest the:
S&P 500 will open 4 points lower at 2,098 with the
Dow Jones expected to open 32 points lower at 17,513 and the
Nasdaq 100 9 points lower at 4,557.
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