LDN - Business

Stock futures drop as Saudi tensions add to growing worries

[October 15, 2018] By Medha Singh

(Reuters) - U.S. stock futures pointed to a lower open on Monday, mirroring global stocks, as growing tensions between Western powers and Saudi Arabia added to worries over rising borrowing costs and the impact of tariffs as the earnings season kicks into gear.

Shares of Bank of America <BAC.N> reversed losses to trade 0.21 percent higher premarket after the second-largest U.S. lender's profit rose more than expected, boosted by lower costs, and as lending growth helped offset lower bond trading revenue.

U.S. President Donald Trump has threatened "severe punishment" if it is found that journalist Jamal Khashoggi, who disappeared on Oct. 2, was killed in the Saudi consulate. Saudi Arabia has vowed to retaliate if the West moves to punish the Kingdom.

Investors suspect the latest developments could undermine the leadership of Crown Prince Mohammed bin Salman and has the potential to eventually destabilize the oil-rich kingdom.

"The indices are poised to open the new trading week in the red as tensions between the Saudis and the U.S. mount, dampening the prospects of Friday's relief rally to extend," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Last week ended on a positive note with the benchmark S&P 500 <.SPX> rebounding after six sessions of losses. But Wall Street still notched its biggest weekly fall since March.

The clearest picture yet of the impact of the U.S.-China trade war will be the third-quarter earnings season, especially the company forecasts. Profits at S&P companies are expected to have risen 21.5 percent, according to I/B/E/S data from Refinitiv, less than the growth in the past two quarters.

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Traders work at the post where UnitedHealth Group is traded on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 31, 2018. REUTERS/Brendan McDermid/File Photo

At 7:14 a.m. ET, Dow e-minis <1YMc1> were down 71 points, or 0.28 percent. S&P 500 e-minis <ESc1> were down 10.5 points, or 0.38 percent and Nasdaq 100 e-minis <NQc1> were down 46.25 points, or 0.64 percent.

After helping the markets on Friday, shares of the heavily weighted FAANG group dropped. Facebook <FB.O>, Amazon <AMZN.O>, Apple <AAPL.O>, Netflix <NFLX.O> and Google-parent Alphabet <GOOGL.O> were down between 0.20 percent and 0.90 percent.

U.S.-listed Chinese stocks were also lower and among the most heavily traded. Alibaba <BABA.N>, JD.com <JD.O>, Baidu <BIDU.O> and Ctrip.com <CTRP.O> shed between 1.3 percent and 4.3 percent.

Sears Holdings <SHLD.O> plummeted 33.7 percent after the retailer filed for Chapter 11 bankruptcy, throwing into doubt the future of the company which has withered in the age of internet shopping.

Economic data at 8:30 am ET (1230 GMT) is expected to show U.S. retail sales rose 0.6 percent in September, after edging up 0.1 percent in August.

(Reporting by Medha Singh in Bengaluru; Editing by Shounak Dasgupta)

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