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Global Stocks Edge Cautiously Higher; Saudi Tensions, China Weakness, Cap Gains

The Tuesday Market Minute

  • Global stocks edge cautiously higher, but Saudi tensions, weak China data keep a lid on gains as U.S. earnings season kicks into high gear
  • Secretary Pompeo arrives in Riyadh to meet with King Salman amid reports that Saudi Arabia may admit some responsibility for the disappearance of prominent journalist Jamal Khashoggi
  • China stocks fall into bear market territory ahead of Friday’s Q3 GDP release amid persist concern that its U.S. trade war will harm second half growth.
  • U.S. stocks called higher, with the Dow slated for a 30 point bump, ahead of earnings from Morgan Stanley, Goldman Sachs, Johnson & Johnson and IBM.

Market Snapshot

Global stocks edged cautiously higher Tuesday, helping U.S. equity futures rise modestly into positive territory, even as investors continue to eye developments in Saudi Arabia linked to the disappearance of prominent journalist Jamal Khashoggi and fret over further signals of a trade war-related slowdown in China.

U.S. Secretary of State Mike Pompeo arrived in Riyadh earlier today and will meet King Salman to discuss the Khashoggi case amid speculation that the Kingdom is preparing a report that will admit the journalist’s death but pin the responsibility on interrogators working at the Saudi consulate in Istanbul, where Khashoggi was last seen on September 28.

Khashoggi’s disappearance, and presumed murder, has cast a dark shadow over both a planned investment conference later this month in Riyadh, which had been expected to include some of the biggest names in U.S. business, as well as broader global market sentiment given the potential fall out between the U.S. and a critical security ally in the Gulf region.

Market sentiment has been further blunted by persistent signals of slowing growth in China, the world’s second largest economy, linked to the impact of its ongoing trade war with the United States, and the implications of rising interest rates in the U.S. and elsewhere, which have clipped equity benchmark all over the world.

Asia markets were mixed in overnight trading as a result, with a weaker Japanese yen helping the Nikkei 225 jump 1.25% by the close of trading to 22,549.24 points while the broader MSCI Asia ex-Japan index was marked 0.1% higher heading into the final hours of trading. Stocks in China traded notably to the downside, however, with the Shanghai Composite falling 1.1% to drag the benchmark into bear market territory from its May 21 peak.

Early indications from U.S. equity futures suggest a modest rebound is slated for Wall Street later today, although key earnings from Morgan Stanley (MS) and Goldman Sachs (GS) , Johnson & Johnson (JNJ) and IBM (IBM) could dictate the direction of the trading day. Contracts tied to the Dow Jones Industrial Average indicated an opening bell gain of 46 points while those linked to the broader S&P 500 were suggesting an 8 point bump.

The Nasdaq Composite index , which slipped into correction territory last week, was marked 36.8 points higher in early trading as investors await the kick-off of FAANG earnings after the bell in the form of a third quarter update from Netflix (NFLX) .

European stocks were modestly higher at the start of trading, with the Stoxx 600 rising 0.27% in Frankfurt, although investors remained fixated on both the European Commission’s reaction to Italy’s budget plans, which envisage a 2.4% deficit next year, and the potential for a no-deal Brexit ahead of a crucial EU summit later this week in Brussels.

Global oils prices were modestly weaker overnight, even as data continues to suggest that shipments of Iranian crude have fallen sharply since President Donald Trump withdrew from a multi-lateral nuclear treaty last spring and threatened sanctions on Tehran’s oil sales, which come into force on November 4. A stronger U.S. dollar, which rose 0.1% against a basket of six global currencies, and questions over China demand were strong enough to hold down prices, even amid the rising tensions in the Gulf linked to the Khashoggi case and Trump’s warnings of “severe punishment” if Riyadh were found to be involved.

Brent crude contracts for December delivery, the global benchmark, were seen 23 cents lower from their Monday close in New York and changing hands at $80.55 per barrel while WTI contracts for November delivery, which are more tightly liked to U.S gas prices, were seen 26 cents lower at $71.52 per barrel.