LONDON (Alliance News) - UK stocks are set to open lower Monday, while the price of oil remains near recent highs, as markets continue to be driven by the unfolding events in Iraq.
Stocks closed lower across the UK and Europe on Friday as rebel Sunni militants looked to be advancing on the Iraqi capital of Baghdad, after seizing smaller towns in the north of the country. Over the weekend the ISIS group released pictures of an apparent execution of hundreds of Shiite soldiers as their advance continued, further weighing on investor sentiment.
Futures point towards UK stocks opening down Monday, with CMC Markets calling the FTSE 100 to open 13 points lower at 6,765 points.
"The escalation of conflict within Iraq has been driving up the price of oil and energy, along with precious metals. However, this is beginning to feed into the equities markets, where the possibility of US involvement is driving increased flow from equities to bonds and safe-haven assets," said Alpari research analyst Joshua Mahony.
US stocks managed to close marginally higher on Friday, with both the DJIA and the S&P 500 gaining 0.3%, partly due to a more stable oil price.
Brent oil peaked at USD114.04 early on Friday before stabilising back down at USD112 per barrel after the European stock markets closed. However, the oil price has been rising again early Monday as geopolitical tensions over the weekend continued to heighten. Ahead of the equity market open, Brent oil currently trades up at USD113.15 per barrel.
Although it has taken a back seat to Iraq of late in terms of investor attention, tension between Russia and Ukraine also is weighing on sentiment. Russian gas supplier Gazprom has reportedly said Monday that Ukraine must now pay for all gas in advance, after threatening to make such a move for a number of weeks.
It has been a mixed Monday session in Asia, where the Nikkei has closed more than 1.0% lower, while the Hang Seng is fractionally lower, and the Shanghai Composite is up 0.5%.
European equity sentiment was negative across the board on Friday, but it was stocks exposed to the UK property market that fared the worst, after Bank of England Governor Mark Carney warned last week that interest rates may start to rise sooner than the market was previously expecting.
The UK housing market is likely to remain in focus this week, with the BoE's Financial Policy Committee holding its quarterly meeting on Tuesday, from which any decisions will be published in the financial stability report on June 26. Then on Wednesday the minutes from the latest BOE Monetary Policy Committee meeting are published, from which investors are increasingly expecting a more balanced debate about an interest rate rise, especially given Carney's hawkish comments last week.
Potentially easing the pressure on the BoE slightly, data released from property search company Rightmove overnight showed UK house prices remained almost unchanged in June. On a month-over-month basis, prices rose 0.1% in June, following a 3.6% jump in May. House prices rose 7.7% year-over-year in June, a slower rate of increase than the 8.9% rise in May. House prices in most of the regions declined in June compared to the previous month, with prices in London decreasing 0.5% due mainly to a combination of buyer reluctance and over 20% more sellers entering the market this month, Rightmove said.
The main economic focus of the morning is eurozone consumer price inflation data for May, due at 1000 BST. Although it will be far too soon to see the effect of the recent rate cut by the European Central Bank, investors will be watching to see if price growth has continued to deteriorate in the single currency block since the preliminary reading in early Mary. Economists are expecting consumer prices to be confirmed as rising by 0.5% year-on-year, while on a monthly basis prices are seen as falling by 0.1%.
Otherwise the economic calendar remains light Monday, with no UK data due. From the US, the NY Empire State manufacturing index is due at 1330 BST, followed by industrial production data at 1415 BST.
In the UK corporate calendar Monday, full year results have already been released form Picton Property Income, Majestic Wine, and RM2 International.