US pre-open: Stocks set for losses as geopolitical tensions mount

US stocks looked set for heavy losses at the open on Tuesday, tracking big declines in Asia and Europe, as worries about US-Saudi relations and Italy's finances weighed on sentiment.

At 1210 BST, Dow Jones Industrial Average and S&P 500 futures were 1% and 1.2% lower, respectively, while Nasdaq futures were down 1.4%.

Oanda analyst Craig Erlam said the selloff was down to the number of underlying risk factors in the markets right now, be it US interest rates, Brexit, Italian debt, trade wars or emerging markets.

"These are all destabilising factors and sentiment may finally be caving under the weight of it all. Trump’s tax cuts ensured that the US is the last to fall, with companies reporting stunning earnings growth in the first two quarters and the third shaping up the same way, but this can only last so long and its finally taking its toll.

"The question now is how bad it gets and what is done to reassure investors. Instability in the markets could encourage the Fed to take its foot off the gas when it comes to interest rate hikes which may ease some of the tension in the markets, given that the sell-off appeared to start with Powell’s claim that the central bank is a long way from neutral. This came in the same week that we got some solid economic figures that did little to change people’s views that rate hikes could be too aggressive."

Worries about souring relations between the US and Saudi Arabia dented investors' appetite for risk after Donald Trump said on Monday that he was not satisfied with the Kingdom's response over the killing of journalist Jamal Kashoggi.

In addition, comments from Turkish President Erdogan sparked concerns about a diplomatic crisis in the region, after he said there was strong evidence that Kashoggi's killing was premeditated. Addressing MPs from his ruling party, Erdogan demanded that Saudi Arabia give answers about where the journalist's body was and who ordered the operation.

Meanwhile, Italy was still firmly in focus as the European Union is due to give its decision on the country's budget later in the day amid widespread expectations it will be rejected.

In corporate news, Harley-Davidson looked set for solid gains at the open after the motorcycle maker's third-quarter adjusted earnings beat expectations and it confirmed its full-year shipment forecasts.

United Technologies edged higher in pre-market trade after its third-quarter profit and sales surpassed analysts' expectations and the company lifted its outlook.

Low cost airline JetBlue was also likely to be in focus after the release of its third-quarter numbers.

Earnings are still due from McDonald's, 3M and Caterpillar ahead of the open, while the Richmond Fed manufacturing index for October is at 1500 BST.