US markets finished the session near their highs last night, but a more sober view of the situation has taken hold in London. Talk that it might be a difficult task to get China to meet its growth target put significant downward pressure on the mining sector, which is always first to feel a chill wind when bad news about China crosses the wires.
Meanwhile, it appears that Russia is still feeling rather frosty about relations with the US and Europe, helping to reignite concerns about the situation in Ukraine that had lain dormant for some time.
In the UK, CPI growth was ahead of expectations but the pound has failed to hold gains against the US dollar over fears that price growth is still not strong enough to force the Bank of England’s hand.
Dominating the headlines this morning were Vodafone and M&S, which both saw falls in their share prices. Income investors remain very happy with the telecoms firm, but those looking for capital growth will be disappointed that the company expects a drop in earnings for the coming year. Meanwhile M&S has revealed another fall in profits, with the clothing division once again to blame. It is something of a mystery why a company that has seemingly mastered the food element is unable to apply the same magic to its floundering clothing department.
A second consecutive day with few macro drivers for US markets looms, condemning markets to more directionless trading. All eyes remain on the ten-year Treasury yield, which remains stubbornly close to 2.5%. Any signs of a rise here could prompt the beginning of a small correction in stock markets, since sentiment among investors remains decidedly weak.
Ahead of the open, we expect the Dow Jones to start around 17 points lower at 16,494.