16th Jun 2014 12:06
LONDON (Alliance News) - US stocks are set to follow the UK and Europe lower Monday as geopolitical concerns continue to weigh on sentiment around the globe.
US stocks managed to record small gains on Friday, despite falls across Europe, but futures trading indicates a lower open can be expected Monday, with the S&P 500 currently set to open 7 points lower at 1,929, and the DJIA currently set to open 51 points lower at 16,724.
With the economic and corporate calendars looking light Monday, geopolitical concerns remain the major driving force, with investors now having to keep track with events in Iraq as well as Ukraine.
Russia has moved to start charging Ukraine in advance for its energy supply Monday, after threatening to do so for some time in the face of what it calls "chronic non-payment". Russia had given cash-strapped Ukraine until 0600 GMT Monday to settle about 2 billion dollars in gas arrears. The move comes after weeks of debate over the issue, with Ukraine at one point arguing that Russia was actually the party to owe money, after taking control of billions of dollars worth of gas located beneath the Crimea peninsular.
In Iraq, Jihadists are continuing their fight towards the capital Baghdad, although momentum seemed to have slowed Monday due to increased resistance by Shia militias. The Islamic State in Iraq and the Levant) said it had captured the northern town of Tel Afar "with the exception of a small heavily guarded area known as the Green Zone," freeing "hundreds of prisoners." The claim came on a Twitter account used by the al-Qaeda splinter group for updates on its operations in northern Nineveh province.
"Investors will be watching the newswires for military reaction from the United States," said CMC Markets market analyst Jasper Lawler. "Any intervention will give investors? confidence that the US government is willing to act to prevent a supply-shock in crude oil and that could contain oil prices."
After pushing higher in morning trade, the price of Brent Oil has stabilised for now, trading broadly flat on the day at USD112.56 per barrel.
Shares in US-listed medial device maker Covidien are expected to open as much as 35% higher after Medtronic announced a takeover of the smaller company in a deal valued at about USD42.9 billion. The news saw shares of UK rival Smith & Nephew fall earlier Monday as the FTSE 100 company had previously been considered a potential takeover target of Medtronic.
The major economic event of the week in the US is the outcome of the Federal Reserve's latest policy meeting on Wednesday afternoon UK time. While a further USD10 billion cut to monthly asset purchases is widely expected, the meeting will also include an update of economic projections, and a press conference by Chair Janet Yellen that may offer clues as to the timing of a US interest rate rise.
Tapering is no longer a major market mover, says Rabobank analyst Michael Every. "Instead, attention has shifter to the first rate hike."
On Monday, the NY Empire State manufacturing index for June will be released at 1330 BST, with economists expecting a drop in the indicator to 15.70, from the 19.01 recorded in May. At 1415 BST, US industrial production data is expected to show a turnaround in May, with 0.4% month-on-month growth expected after a fall of 0.6% was recorded in April.
Ahead of the US open, stocks in the UK and Europe continue to trade lower. The FTSE 100 is down 0.3% at 6,755.78, the FTSE 250 is down 0.9% at 15,677.25, and the AIM All-Share is down 0.2% at 786.09. The French CAC 40 is down 0.5%, and the German DAX is down 0.2%.
By Jon Darby; [email protected]; @jondarby100
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