The Monday Market Minute

  • Global stocks weaken as geopolitical and trade tensions keep investors cautious following last week's selling on Wall Street.
  • Saudi Arabia has vowed to react to any punishment meted out following the disappearance of prominent journalist Jamal Khashoggi in Turkey last week.
  • Japanese stocks tumble amid concern the U.S. could use currency manipulation rules in future trade agreements as Tokyo negotiates a new deal with Washington
  • U.S. stocks set for more red at the open, with the Dow indicated 20 points lower at the bell after better-than-expected third quarter earnings from Bank of America. 

Market Snapshot

Global markets weakened Monday as investors took a cautious stance on stocks amid escalating tensions between Washington and Riyadh over the death of a prominent Saudi journalist in Turkey last month as well as renewed concerns for trade disputes between the U.S. and its major economic partners.

Jamal Khashoggi's disappearance last month, following a visit to the Saudi consulate in Istanbul on September 28, has sparked both an international murder investigation and a sharp response from the White House, with President Donald Trump threatening "severe" consequences in the Saudi government were to be deemed responsible. 

Just spoke to the King of Saudi Arabia who denies any knowledge of whatever may have happened "to our Saudi Arabian citizen." He said that they are working closely with Turkey to find answer. I am immediately sending our Secretary of State to meet with King!

— Donald J. Trump (@realDonaldTrump) October 15, 2018

The tensions slammed shares in Riyadh Monday, with the benchmark Tadawul All Share Index falling more than 3.5% Sunday, sending ripples of concern through markets all around the world and pulling Brent crude prices higher following last week's sell-off amid the turmoil on Wall Street. 

U.S. equity futures indicated a weak opening on Wall Street Monday, with contracts tied to the Dow Jones Industrial Average suggesting a 60 point decline and those liked to the broader S&P 500 marked 6.3 points to the downside amid the 'risk-off' sentiment. Nasdaq Composite futures were indicated 27 points lower.

Markets in Asia were also rattled by the tensions, as well as comments over the weekend from U.S. Treasury Secretary Steve Mnuchin, who told the IMF's annual meeting in Bali that his department would like to use language to prevent current manipulation into any new U.S. trade deals.

The comments hit markets in Japan, which is currently negotiating a new agreement with the U.S, with the Nikkei falling 1.87% to close at 22,271.30 pionts while the broader MSCI Asia ex-Japan index was marked 1.1% lower heading into the final hours of trading.

Stock slump resumes in Asia after only short lived stabilization. Risk-Off mood returned following a weekend of warnings on global econ fragility from annual IMF gathering and rising oil prices on US-Saudi tensions. Pound slipped as no Brexit deal reached. Most EM currencies dip. pic.twitter.com/bRjmsF3Sgu

— Holger Zschaepitz (@Schuldensuehner) October 15, 2018

European stocks were softer at the open, as well, with the Stoxx 600 falling past a 22- month low by mid-morning in Frankfurt before paring the decline to around 0.05% as investors await the formal filing of Italy's 2019 budget to the European Commission and the ongoing uncertainty of Brexit negotiations, following a weekend of 11th-hour talks ahead of Wednesday's EU Summit that is expected to reach at least a partial conclusion on Britain' future relationship with the bloc.

Electrolux AB (ELUXY) was an early mover of note, with shares in the home appliance manufacturer falling 2% in Stockholm after the Chapter 11 bankruptcy filing of Sears Holding (SHLD) in the United States late Sunday. Electrolux said around 10% of its annual revenues from the Major Appliances North America division are earned via its association with Sears, but noted that it's been making contingency plans since the retailer's financial concerns became apparent earlier this year. 

Oil prices resumed their gains following last week's sell-off amid the tensions in Riyadh and the looming U.S. sanctions on the sale of Iranian crude, which come in to force in just over two weeks.

Brent crude contracts for December delivery, the global benchmark, were seen 77 cents higher from their Friday close in New York and changing hands at $81.20 per barrel while WTI contracts for November delivery, which are more tightly liked to U.S gas prices, were seen 64 cents higher at $71.86 per barrel.