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The World Bank’s decision to cut its 2014 growth target is a clear warning to those that thought the Q1 US GDP blip would have few ramifications on the rest of the global economy. Although the bank still expects a rebound later this year, the news has been taken as a cue to sell FTSE mining stocks once again, pushing the sector to three-month lows.
Meanwhile, the apparent unravelling of the post-2003 settlement in Iraq has sent oil prices surging for the second time in a week; a signal of how sensitive investors are to the prospect of higher oil prices that could act as a dramatic drag on global growth. For now, it seems the selling is confined to the more skittish market participants, but if the index moves much lower the quiet retreat could turn into an increasingly panicky rout.
Some US macro data of real weight finally appears this afternoon, in the form of retail sales. Compared to the market-moving events of last Thursday it is relatively minor, but with US futures turning positive this morning a strong reading could provide an excuse for a modest rally that will make back lost ground and put markets back on their upward trajectory. Ahead of the open, we expect the Dow Jones to start 20 points higher at 16,864.