12th Jun 2014 13:00
LONDON (Alliance News) - US stocks are set to open marginally lower Thursday following some weaker-than-expected retail sales data that has disappointed investors who were looking for a stronger rebound in the US economy following a disappointing first quarter.
US retail sales expanded by 0.3% in the month of May, after growing at just 0.1% in April. Economists had been expecting a stronger growth rate of 0.6%. Excluding car sales, retail sales were up by just 0.1% over the month, following flat growth in April.
The US futures markets, which had previously been indicating a marginally higher open, despite a deteriorating situation in Iraq, slipped into the red and now indicate that the DJIA, the S&P 500, and the Nasdaq Composite will open flat to slightly lower.
"The consumer is hugely important to the US economy, contributing a significant amount to total output," said Alpari market analyst Craig Erlam.
Initial jobless claims, released at the same time, also disappointed, rising to 317,000 in the week ended June 6, from 313,000 in the previous week, more than the 310,000 that economists had forecast.
Both the S&P 500 and the DJIA broke a multi-day winning streak on Wednesday to close down by 0.4% and 0.6%, respectively, as a lowered growth forecast from the World Bank and concerns over the situation in Iraq led to some investor caution and profit taking.
"However, markets have not been very sensitive to geopolitical tensions this year," said Rabobank analyst Michael Every, who suggests that Wednesday's softer tone merely reflected markets taking a breather, having recently reached recent highs, rather than a likely ongoing reaction to events in Iraq.
Indeed, ahead of the disappointing data, markets had looked set to try for further gains despite a further deterioration in Iraq. The Iraqi parliament Thursday adjourned a session to vote on declaring a nationwide state of emergency due to lack of quorum, even as radical jihadists pressed ahead towards the capital Baghdad.
Earlier this week, the radical Sunni group, ISIL, took control of the northern province of Nineveh, including Mosul, Iraq's second largest city. The latest reports say that ISIL has pushed deep into the province of Diyala, some 75 kilometres south of Baghdad.
The effect on equities has so far been contained to those stocks with direct exposure to Iraq, such as London-listed oil and gas explorers Gulf Keystone, and Afren, down 12% and 3.4%, respectively, since the start of the week.
The oil price, however, has risen strongly amid supply disruption and stability concerns. Brent has risen by more than 3% so far this week to its highest in almost three months, peaking Thursday at USD112.26 per barrel. West Texas Intermediate oil prices also have risen, to above USD106 per barrel, the highest level so far this year.
"Evidently, Brent oil prices are driven up by the escalation of the crisis in Iraq," said Forex.com technical analyst Fawad Razaqzada.
Ahead of the US open, trading across Europe remains fairly subdued, with the French CAC 40 up 0.2% and the German DAX just fractionally higher.
In the UK, the FTSE 100 up 0.1% at 6,847.58, the FTSE 250 is up 0.3% at 16,136.52, while the AIM All-share continues to under-perform, trading down 0.4% at 796.33.
The mining sector has been lifted off earlier lows after precious metal miner Lonmin announced a tentative deal has been reached over wages and working conditions with the leadership of the union that has brought the South African platinum mining industry to a halt for months.
In a statement, the company said the two sides have reached "informal undertakings" in principle on a potential deal. Peers Anglo American Platinum Ltd, part of Anglo American PLC, and Impala Platinum Holding Ltd have received the same in principle undertakings, it added.
The news of a possible solution to the strikes comes after the mining stocks have been leading the fallers in London on the back of both a lower global growth outlook from the World Bank and big cuts to forecast iron ore prices by Morgan Stanley.
Lonmin has jumped 5.2% to the top of the FTSE 250 gainers, while FTSE 100-constituent Anglo American remains down 3.1%.
By Jon Darby; [email protected]; @jondarby100
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