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Sep 16, 2019

EU - FX | Currencies: Dollar rises as Trump approves oil stockpile use after Saudi attacks

3-4 minutes - Source: CNBC




Reusable US dollar
The U.S. dollar has regained some strength in recent weeks.
Getty Images
The dollar rose against a basket of currencies on Monday as U.S. President Donald Trump’s authorization of the use of an emergency crude stockpile in response to drone attacks on Saudi Arabian refining facilities cooled a surge in oil prices.
The Japanese yen and Swiss franc, both traditional safe-haven currencies, gave up much of their initial gains with a pullback in crude prices and anxiety about a disruption in global energy supply, analysts said. Still, investors remained nervous about another attack, which underpinned demand for currencies of oil exporters such as Norway and Canada.
“The market took it yet with another shrug,” said Boris Schlossberg, managing director of FX strategy with BK Asset Management in New York. “If you see another attack, there might be another reaction.”
Oil prices had jumped as much as 19% in reaction to the drone strikes, which knocked out more than 5% of global oil output. Yemen’s Iran-aligned Houthi group claimed responsibility, but the United States has blamed Tehran.
On Sunday, Trump said he had authorized the release of oil from the U.S. Strategic Petroleum Reserve (SPR) if needed in a quantity to be determined. He also said Washington was “locked and loaded” to retaliate for the attacks on the Saudi facilities.
Another factor boosting the greenback was some exiting of bearish dollar bets in advance of the U.S. Federal Reserve’s two-day policy meeting.Traders widely expect the Fed will cut interest rates by a quarter of a percentage point this week. In July, Fed policymakers lowered short-term rates for the first time since 2008.
“The market wants to short-cover in front of the Fed if the Fed doesn’t cooperate,” Schlossberg said.
On the other hand, speculators trimmed their bullish bets on the dollar, according to the latest data from the Commodity Futures Trading Commission.
An index that tracks the greenback against the euro, yen, sterling and three other currencies was up 0.4% at 98.64. It touched its lowest level since Aug. 27 on Friday.
The dollar was -0.05% lower at 108.045 yen, recovering from an earlier low of 107.44 during Asian trading. The greenback fell to 98.655 Swiss francs before reversing to trade at 99.29, up 0.29% on the day.
Among currencies tied to oil-exporting countries, the Norwegian crown strengthened to 8.9179 per dollar earlier before retreating to 8.965.
The Canadian dollar rose 0.3% to C$1.3249 after earlier reaching C$1.3208. The Russian ruble was 0.3807% higher.
Sterling, which has soared over the past week on growing investor confidence that a no-deal Brexit is off the table, fell back from a two-month high to $1.2418, down 0.68% on the day. It was little changed against the euro to 88.565 pence .

Bonds | Treasury Yields Report: Treasury yields drop after drone strike in Saudi Arabia sparks bid for safer assets

Thomas Franck




U.S. Treasury yields fell on Monday after drone attacks on Saudi oil production facilities escalated tensions in the Middle East and pushed investors toward safer assets like government debt.
The yield on the benchmark 10-year Treasury note, which moves inversely to price, was lower at around 1.862%, while the yield on the 30-year Treasury bond fell to 2.334%. The 10-year yield had posted its largest weekly rally since November 2016 as fears of an impending economic downturn eased.
Treasury yields rose after drone attacks on Saudi Arabian crude facilities over the weekend, which were estimated to have shut around 5% of the world’s supply.
The attack hit an oil processing facility at Abqaiq and the nearby Khurais oil field, knocking out production of 5.7 million barrels a day, or half of Abqaiq’s daily volume. President Donald Trump in response authorized the release of oil from the Strategic Petroleum Reserve, the nation’s emergency oil reserve, should it be needed to stabilize crude prices.
“Using the reaction of the Treasury market as a proxy it’s obvious that the broader growth implications far outweigh any near-term inflationary impulse,” wrote Ian Lyngen, head of U.S. rate strategy at BMO Capital Markets. “The attacks only reinforce our expectations for the Fed to cut rates a quarter-point on Wednesday and then again in October.
“If anything,” he continued, “the risk that the situation escalates to a protracted military engagement adds to the probability that the Fed isn’t going to be able to stop cutting rates after the aggregate 75 bp of ‘fine tuning’ which is currently priced in.”
Trump said the U.S. was “locked and loaded” and awaiting communication from Saudi Arabia in response to the drone attacks. Yemen’s Houthi rebels claimed responsibility for the attack, but the U.S. has nonetheless suggested that Iran may be responsible for the strike.
The Federal Reserve will begin its next two-day meeting on Tuesday, when members of the Federal Open Market Committee will discuss their economic outlooks and the merits of adjusting interest rates. The officials are widely expected to cut the overnight lending rate by 25 basis points amid a weaker economic situation in Europe and trade tensions between the U.S. and China.


U.S. Market | Wall Street Closing Report: Dow snaps 8-day winning streak on fears spiking oil will slow the global economy

Fred Imbert



Stocks fell on Monday amid fears that a surge in oil prices following an attack in Saudi Arabia could slow down global economic growth.
The Dow Jones Industrial Average slid 145 points, or 0.5%. It was the first decline in nine days for the Dow. The S&P 500 pulled back 0.3%. The Nasdaq Composite also dipped 0.3%.
Quincy Krosby, chief market strategist at Prudential Financial, said “anything that would suggest this is going be painful for the economy” is going to hurt the stock market.
“It’s contained, right now,” said Krosby. “That’s a function of the U.S. increasing its oil production. We are much less vulnerable to outside influences.”
West Texas Intermediate futures jumped more than 14%, notching its biggest one-day gain since 2008. WTI briefly rose more than 15% overnight. The sharp move higher comes after a series of drone strikes on Saturday knocked out about half of Saudi Arabia’s daily crude production. Iranian President Hassan Rouhani said Monday that the attack was a reciprocal response to attacks in Yemen.
Storage tanks are seen at the North Jiddah bulk plant, an Aramco oil facility, in Jiddah, Saudi Arabia, Sunday, Sept. 15, 2019.
Amr Nabil | AP
Saudi Aramco, Saudi Arabia’s national oil company, will reportedly try to restore about a third of the country’s production by Monday.
General Motors shares fell 4.3% after the United Auto Workers union went on strike after contract talks between the two entities broke down. Higher gasoline prices could also potentially hurt sales.
Airlines JetBlue Airways and United Airlines dropped at least 2.8% each while American Airlines lost 7.3%. Devon Energy skyrocketed more than 12% while Marathon Oil jumped 11.6%. Dow members Exxon Mobil and Chevron rose more than 1% each. The Energy Select Sector SPDR Fund (XLE) had its best day of the year, jumping 3.41%.
President Donald Trump tweeted Sunday before the futures open the U.S. could use oil from its Strategic Petroleum Reserve to keep the market “well-supplied.”
However, Energy Secretary Rick Perry told CNBC’s “Squawk on the Street” on Monday that it was premature to say whether the use of reserves will be needed.
Consistently higher oil prices could lead to increasing fuel prices. This would put more pressure on a global economy that is already coping with a slowing manufacturing sector and stubbornly low growth.
This “is the largest supply shock ever. The world is dependent on strategic reserves right now and you will see SPR draws,” said Bob Ryan, chief commodities and energy strategist at BCA Research, in a note. “The market could tighten significantly if the outage is indeed weeks and not days.”
Sentiment was also depressed after China’s industrial production fell to a new 17½-year low. Production rose 4.4% in August while analysts polled by Reuters expected a gain of 5.2%. The industrial-production slowdown came as China and the U.S. remain embroiled in a trade war.
The major indexes posted solid weekly gains last week and closed in on record highs set in July. Through Friday’s close, the Dow and S&P 500 were both about 0.7% below their all-time highs while the Nasdaq was nearly 2% away from its record.
“Market breadth is improving as value stocks begin to catch a bid,” said Craig Johnson, chief market technician at Piper Jaffray, in a note. But “at this juncture, we suspect most of the good news is already priced in and the downside risk from any disappointment is high.”

Futures & Commodities | Gold | Gold Price Report: Gold rises 1% on global turmoil — but silver surges more

Saheli Roy Choudhury



Gold and silver prices jumped more than 1% on Monday as investors fled to safe-haven assets after an attack on Saudi oil facilities raised concerns over global energy supply and ratcheted tensions in the Middle East.
Spot gold jumped 1.27% to $1,507.40 per ounce while U.S. gold futures rose 0.83% to $1,512.1. The gold-backed SPDR Gold Trust exchange-traded fund was down 0.82% at $140.15, with 874.51 tonnes of gold in trust on Friday.
Like gold, silver is seen as a safe-haven investment but the metal is also used in the production of consumer electronics goods as well as in the industrial sector, such as solar panels. Spot silver gained 2.96% to $17.94 per ounce.
The moves came after Saudi Arabia on Saturday shut down half its oil production after a series of strikes hit the world’s largest oil processing facility. The attack was claimed by Yemen’s Houthi rebels and the Trump administration has blamed Iran.
That closure is set to affect almost 5.7 million barrels of crude production a day, according to Saudi Aramco. That’s about 5% of the world’s daily oil production. In August, Saudi Arabia produced 9.85 million barrels per day, according to the data from the U.S. Energy Information Administration.
The Kingdom’s energy minister said the attacks also led to a halt in gas production, which is set to reduce the supply of ethane and natural gas liquids by 50%.
U.S. crude and Brent prices jumped more than 9% each Monday morning during Asian hours.
The attack raised tensions in the Middle East after the United States blamed Tehran for the strikes, and called it an “unprecedented attack on world’s energy supply.” For his part, U.S. President Donald Trump said the U.S. is “locked and loaded,” but his administration is waiting on Riyadh to determine who launched the strikes before proceeding on a course of action. Iran has dismissed those allegations as “meaningless.”
Elsewhere, the U.S. Federal Open Market Committee is set to meet on Tuesday and Wednesday and markets expect the central bank to cut interest rates by a quarter point.
Global growth outlook remains subdued amid the ongoing trade war between the U.S. and China, which could potentially sustain demand for safe-haven assets. Chinese Premier Li Keqiang said in a recent interview that it is “very difficult” for the world’s second-largest economy to maintain a growth rate at 6% or more.

Energy | Oil | Oil Price Report: US oil prices end session up 14%, Brent crude oil jumps the most in history after Saudi attacks

Yun Li



Oil prices soared after a coordinated attack hit the heart of Saudi Arabia’s oil industry on Saturday, forcing the kingdom to cut its oil output in half.
Brent crude futures, the international benchmark, rose as much as 19.5% to $71.95 per barrel at the open, the biggest intraday jump on record. The contract was later at $69.06, up $8.84 or 14.71%.
U.S. West Texas Intermediate futures climbed as much as 15.5% to $63.34. The contract settled at $62.9, up $8.05 or 14.8%.
An oil processing facility at Abqaiq and the nearby Khurais oil field was attacked on Saturday, knocking out 5.7 million barrels of daily crude production or 50% of the kingdom’s oil output. Saudi Aramco, the national oil company, reportedly aims to restore about a third of its crude output, or 2 million barrels by Monday. However, Bloomberg News reported it could take weeks before Aramco restores the majority of its output at Abqaiq.
Iranian president Hassan Rouhani said Monday the attacks on Aramco were a “reciprocal response” to the aggression against Yemen.
“While in the short term the direct physical impact on the market might be limited, this should move the market away from its bearish macroeconomic cycle and raise the risk premium in the market as funds reduce their short positions,” said Chris Midgley, global head of analytics, S&P Global Platts.
Oil prices came off their highs after President Donald Trump said he was authorizing the release of oil from the Strategic Petroleum Reserve to keep the markets “well-supplied.”
Abqaiq is the world’s largest oil processing facility and crude oil stabilization plant with a processing capacity of more than 7 million barrels per day. Khurais is the second largest oil field in the country with a capacity to pump around 1.5 million barrels per day. In August, Saudi Arabia produced 9.85 million barrels per day.
Yemen’s Houthi rebels claimed responsibility for the attack, saying it was one of their largest attacks ever inside the kingdom. The Houthis have been behind a series of attacks on Saudi pipelines, tankers and other infrastructure in the past few years.
Trump also said there is reason to believe the U.S. knows the culprit and is “locked and loaded,” while waiting to get the verification from the kingdom to proceed.
Secretary of State Mike Pompeo blamed Iran for the drone strikes, saying in a tweet Saturday Iran has launched an “unprecedented attack on the world’s energy supply.”
A Saudi-led military coalition said Monday that the attack was carried out by “Iranian weapons” and did not originate from Yemen.
“If the Iranians have been driven to desperate measures from the loss of crude export revenues, an attack on Saudi capacity seems a likely response,” Jason Gammel, energy analyst at Jefferies, said in a note on Sunday. “The risk of wider conflict in the regions, including a Saudi or US response, will likely raise the political risk premium on crude prices by $5-10/bbl.”
Goldman Sachs said an extended oil outage could push Brent crude prices north of $75 per barrel as the attack disrupts one of the globe’s largest energy supply chains.
The latest attack came as Saudi Arabia moves forward to take Saudi Aramco public in a major shakeup of the kingdom’s energy sector. Saudi Aramco President and CEO Amin Nasser said Saturday nobody was hurt in the attacks and work is underway to restore production. Aramco did not immediately respond to CNBC’s request for comment on Monday.
WATCH: Saudi oil facilities damaged at around 17 points of impact

Oil Report: Brent crude oil spikes the most in history after Saudi attacks, last up 15%

Yun Li



Oil prices soared after a coordinated attack hit the heart of Saudi Arabia’s oil industry on Saturday, forcing the kingdom to cut its oil output in half.
Brent crude futures, the international benchmark, rose as much as 19.5% to $71.95 per barrel at the open, the biggest intraday jump on record. By early afternoon, the contract was at $69.49, up $9.27 or 15.34%.
U.S. West Texas Intermediate futures climbed as much as 15.5% to $63.34. The contract was later at $63.19, up $8.34 or 15.21%.
An oil processing facility at Abqaiq and the nearby Khurais oil field was attacked on Saturday, knocking out 5.7 million barrels of daily crude production or 50% of the kingdom’s oil output. Saudi Aramco, the national oil company, reportedly aims to restore about a third of its crude output, or 2 million barrels by Monday. However, Bloomberg News reported it could take weeks before Aramco restores the majority of its output at Abqaiq.
“While in the short term the direct physical impact on the market might be limited, this should move the market away from its bearish macroeconomic cycle and raise the risk premium in the market as funds reduce their short positions,” said Chris Midgley, global head of analytics, S&P Global Platts.
Oil prices came off their highs after President Donald Trump said he was authorizing the release of oil from the Strategic Petroleum Reserve to keep the markets “well-supplied.”
Abqaiq is the world’s largest oil processing facility and crude oil stabilization plant with a processing capacity of more than 7 million barrels per day. Khurais is the second largest oil field in the country with a capacity to pump around 1.5 million barrels per day. In August, Saudi Arabia produced 9.85 million barrels per day.
Yemen’s Houthi rebels claimed responsibility for the attack, saying it was one of their largest attacks ever inside the kingdom. The Houthis have been behind a series of attacks on Saudi pipelines, tankers and other infrastructure in the past few years.
Trump also said there is reason to believe the U.S. knows the culprit and is “locked and loaded,” while waiting to get the verification from the kingdom to proceed.
The U.S. has blamed Iran for the drone strikes on those important facilities. Secretary of State Mike Pompeo said in a tweet Saturday Iran has launched an “unprecedented attack on the world’s energy supply.”
A Saudi-led military coalition said Monday that the attack was carried out by “Iranian weapons” and did not originate from Yemen.
“If the Iranians have been driven to desperate measures from the loss of crude export revenues, an attack on Saudi capacity seems a likely response,” Jason Gammel, energy analyst at Jefferies, said in a note on Sunday. “The risk of wider conflict in the regions, including a Saudi or US response, will likely raise the political risk premium on crude prices by $5-10/bbl.”
Goldman Sachs said an extended oil outage could push Brent crude prices north of $75 per barrel as the attack disrupts one of the globe’s largest energy supply chains.
The latest attack came as Saudi Arabia moves forward to take Saudi Aramco public in a major shakeup of the kingdom’s energy sector. Saudi Aramco President and CEO Amin Nasser said Saturday nobody was hurt in the attacks and work is underway to restore production. Aramco did not immediately respond to CNBC’s request for comment on Monday.
WATCH: Saudi oil facilities damaged at around 17 points of impact

Gold Report: Gold rises 1% on global turmoil — but silver surges more

Saheli Roy Choudhury



Gold and silver prices jumped more than 1% on Monday as investors fled to safe-haven assets after an attack on Saudi oil facilities raised concerns over global energy supply and ratcheted tensions in the Middle East.
Spot gold jumped 1.27% to $1,507.40 per ounce while U.S. gold futures rose 0.83% to $1,512.1. The gold-backed SPDR Gold Trust exchange-traded fund was down 0.82% at $140.15, with 874.51 tonnes of gold in trust on Friday.
Like gold, silver is seen as a safe-haven investment but the metal is also used in the production of consumer electronics goods as well as in the industrial sector, such as solar panels. Spot silver gained 2.96% to $17.94 per ounce.
The moves came after Saudi Arabia on Saturday shut down half its oil production after a series of strikes hit the world’s largest oil processing facility. The attack was claimed by Yemen’s Houthi rebels and the Trump administration has blamed Iran.
That closure is set to affect almost 5.7 million barrels of crude production a day, according to Saudi Aramco. That’s about 5% of the world’s daily oil production. In August, Saudi Arabia produced 9.85 million barrels per day, according to the data from the U.S. Energy Information Administration.
The Kingdom’s energy minister said the attacks also led to a halt in gas production, which is set to reduce the supply of ethane and natural gas liquids by 50%.
U.S. crude and Brent prices jumped more than 9% each Monday morning during Asian hours.
The attack raised tensions in the Middle East after the United States blamed Tehran for the strikes, and called it an “unprecedented attack on world’s energy supply.” For his part, U.S. President Donald Trump said the U.S. is “locked and loaded,” but his administration is waiting on Riyadh to determine who launched the strikes before proceeding on a course of action. Iran has dismissed those allegations as “meaningless.”
Elsewhere, the U.S. Federal Open Market Committee is set to meet on Tuesday and Wednesday and markets expect the central bank to cut interest rates by a quarter point.
Global growth outlook remains subdued amid the ongoing trade war between the U.S. and China, which could potentially sustain demand for safe-haven assets. Chinese Premier Li Keqiang said in a recent interview that it is “very difficult” for the world’s second-largest economy to maintain a growth rate at 6% or more.

Europe | Europe Markets Closing Report: European stocks close lower amid geopolitical tensions; oil shares spike 3%

Elliot Smith



European stocks closed lower Monday as investors digested an escalation of tensions in the Middle East following an attack on Saudi oil production.

TICKER COMPANY NAME PRICE CHANGE %CHANGE VOLUME
FTSEFTSE 100FTSE7344.58-22.88-0.31451921646
DAXDAXDAX12401.95-66.58-0.5353734853
CACCACCAC5617.70-37.76-0.6745206551

The pan-European Stoxx 600 closed provisionally about 0.4% lower. Household goods fell over 1% to lead losses while oil and gas stocks surged 3% as crude prices soared following the oil attack in Saudi Arabia.
Oil prices surged overnight after drone attacks at the weekend hit major oil production facilities in Saudi Arabia, effectively wiping out 5% of global supply. Brent crude hit its highest intra-day percentage gain on record, last trading more than 10% higher at $66.52 a barrel.
President Donald Trump said the U.S. is “locked and loaded” and was waiting to hear from Saudi Arabia as to the next steps, sparking fears of imminent military confrontation. Trump also authorized the release of U.S. oil reserves to help maintain global supply.
Washington has placed the blame for the attacks squarely on Iran — a claim Tehran has disputed. U.S. Secretary of Energy Rick Perry told CNBC on Monday that a coalition of countries should be formed to “put a stop to Iran’s malign activity.”
Elsewhere, data revealed Chinese industrial output for August grew at its slowest pace for 17.5 years. Chinese Premier Li Kequiang said it is “very difficult” for China’s economy to grow at a rate of 6% or more, due it its high starting base and a turbulent international backdrop.
On Wall Street, stocks slid as fears of a global economic slowdown grew amid the surge in oil prices. The Dow Jones Industrial Average fell over 100 points, while the S&P 500 and Nasdaq indexes were both in negative territory.
Back in Europe, U.K. Prime Minister Boris Johnson met with European Commission Jean-Claude Juncker in Luxembourg on Monday, who said he reminded Johnson that it was now up to the British government to offer a solution to the Brexit impasse.
Meanwhile in Italy, reports suggested that former Prime Minister Matteo Renzi is planning to break away from the ruling Democratic Party (PD) to set up a new centrist movement, complicating the new coalition between the PD and the anti-establishment Five Star Movement (M5S).
In corporate news, Axel Springer is planning layoffs as part of a cost-cutting effort after U.S. investment firm KKR became its largest shareholder, the German media group’s chief executive said in an interview published Sunday by the Sueddeutsche Zeitung.
After the board of the London Stock Exchange (LSE) rejected a proposed $36.6 billion takeover offer from Hong Kong Exchanges and Clearing (HKEX), the Asian trading house has arranged meetings with LSE investors in a bid to curry favor, raising the prospect of a hostile takeover, according to Reuters. LSE shares fell over 2%.
Benetton holding company Edizione, which has a controlling 30.25% stake in Italian infrastructure giant Atlantia, expressed its dismay on Sunday following allegations of safety violations by Atlantia. Police on Friday revealed that evidence of falsified safety reports had been discovered as part of a probe of a deadly bridge collapse in Genoa last year.

Stocks on the move

Oil and gas stocks were the biggest climbers, Tullow Oil and Lundin Petroleum each climbing more than 9% during afternoon trade while Technipfmc added 5.8%.
Atlantia shares slid nearly 8% to the bottom of the Stoxx 600 on the back of Friday’s arrests. AMS fell 4% after the management and supervisory boards of Osram Licht, which is subject to a takeover offer from the Austrian chipmaker, expressed concerns about its strategy.
Politico reported that the World Trade Organization (WTO) will rule in favor of the U.S. in a long-running dispute with the European Union over its subsidies granted to aerospace giant Airbus. The decision would give Washington a green light to impose billions of euros in punitive tariffs on EU products. Air France KLM shares slid 4.5% while Airbus and Lufthansa each fell more than 3.5%.

Market Insider | Biggest Moves Premarket: Stocks making the biggest moves premarket: GM, Exxon, Chevron, Apple, Boeing, Lowe's & more

Peter Schacknow



Check out the companies making headlines before the bell:
General Motors – GM workers went on strike against the automaker in the first nationwide walkout since 2007, after the two sides failed to agree on a new contract.
Exxon Mobil, Chevron – These and other energy stocks are getting a boost following the jump in oil prices. Exxon and Chevron in particular will help limit any losses seen by the Dow Jones Industrial Average.
Apple — Walt Disney CEO Bob Iger has resigned from Apple’s board of directors. His departure comes as Disney and Apple prepare to launch competing video services, Disney+ and Apple TV+.
Alder Pharmaceuticals – The drugmaker agreed to be bought by Denmark’s Lundbeck for nearly $2 billion. Alder is a U.S.-based company specializing in migraine treatments.
Square, PayPal – These and other payment firms are likely to grab as much as $280 billion in revenue from banks by 2025, according to a new study on global payments from consulting firm Accenture.
Aimmune Therapeutics – A Food and Drug Administration panel recommended approval of Aimmune’s treatment for peanut allergies in children. It would be the first-ever treatment on the market for that condition if the FDA follows the panel’s recommendation.
Blackstone – The private-equity firm bought Canadian office and industrial property manager Dream Global Real Estate Investment Trust for about $4.7 billion.
Boeing — The head of the UAE’s Civil Aviation Authority said he was not optimistic that Boeing could return its 737 Max to service by the end of this year. UAE airline flydubai is one of the largest Max customers.
Lyft, Uber – The ride-hailing stocks were both upgraded to “buy” from “hold” at HSBC. However, the price targets for both were cut – to $62 from $67 for Lyft, and to $44 from $49 for Uber. The firm said regulatory concerns surrounding both companies are already priced in.
Dick’s Sporting Goods – The sporting goods retailer was downgraded to “market perform” from “outperform” at Wells Fargo Securities in a valuation call, with the stock having hit its price target after a 25% year-to-date gain.
Lowe’s – Wedbush upgraded the home improvement retailer to “outperform” from “neutral,” pointing to signs of improving execution.
Aurora Cannabis – Aurora Cannabis was downgraded to “sell” from “hold” at Stifel Nicolaus, citing the near-term outlook for the cannabis producer, as well as negative investor sentiment for the sector.

U.S. Markert | Futures Indicator: Dow set to lose more than 150 points on fears spiking oil will slow the global economy

Fred Imbert, Silvia Amaro




GP: Traders NYSE concerned 190801
Traders and financial professionals work ahead of the closing bell on the floor of the New York Stock Exchange.
Drew Angerer | Getty Images
U.S. stock futures dropped Monday morning amid fears that a surge in oil prices following an attack in Saudi Arabia could slow down global economic growth.
As of 1:20 p.m. ET, the Dow Jones Industrial Average futures were down 146 points, implying a loss of more than 150 points at Monday’s open. S&P 500 and Nasdaq 100 futures were also down.
That would be the first decline in nine days for the Dow, which had climbed back to within 1% from a record on Friday.
West Texas Intermediate futures jumped more than 11% to trade at $61.25 per barrel. The sharp move higher comes after a series of drone strikes on Saturday knocked out about half of Saudi Arabia’s daily crude production.
Saudi Aramco, Saudi Arabia’s national oil company, will reportedly try to restore about a third of the country’s production by Monday.
President Donald Trump tweeted Sunday before the futures open the U.S. could use oil from its Strategic Petroleum Reserve to keep the market “well-supplied.”
Consistently higher oil prices could lead to increasing fuel prices. This would put more pressure on a global economy that is already coping with a slowing manufacturing sector and stubbornly low growth.
This “is the largest supply shock ever. The world is dependent on strategic reserves right now and you will see SPR draws,” said Bob Ryan, chief commodities and energy strategist at BCA Research, in a note. “The market could tighten significantly if the outage is indeed weeks and not days.”
There are no major corporate earnings nor data releases to note.
—CNBC’s Yun Li contributed to this report.

Asia | Asia Markets Closing Report: Asia Pacific stocks mixed; Brent crude spikes more than 8% after Saudi attacks

Eustance Huang



Stocks in Asia Pacific were mixed on Monday, as oil prices surged following drone attacks over the weekend that hit major oil production facilities in Saudi Arabia.
Mainland Chinese stocks were little changed on the day, with the Shanghai composite little changed at around 3,030.75 while the Shenzhen component was just below the flatline at 9,918.09. The Shenzhen composite added 0.23% to approximately 1,685.09.
A cut in the reserve requirement ratio for banks by the People’s Bank of China (PBOC) went into effect on Monday. The PBOC said in early September that its reserve requirement ratio would be cut by 50 basis points and it would further reduce that ratio by 100 basis points for some qualified banks. That’s set to release 800 billion yuan ($113 billion) in liquidity into the economy.
Meanwhile, Hong Kong’s Hang Seng index shed about 1%, as of its final hour of trading. Shares of Hong Kong Exchanges and Clearing slipped 2.16% following the rejection of its takeover bid by the London Stock Exchange Group last Friday.
Australia’s S&P/ASX 200 closed fractionally higher at 6,673.50 as majority of the sectors declined with the exception of the energy subindex, which soared 3.99% on the back of a surge in oil prices.
Over in South Korea, the Kospi rose 0.64% to end its trading day at 2,062.22 higher despite shares of chipmaker SK Hynix plunging 3.75%.
Overall, the MSCI Asia ex-Japan index traded 0.32% lower.
Markets in Japan were closed on Monday for a holiday.

Crude prices surge, oil stocks spike

Crude prices spiked in the afternoon of Asian trading hours after drone strikes on crucial oil production facilities in Saudi Arabia.
International benchmark Brent crude futures skyrocketed 8.67% to $65.44 per barrel, while U.S. crude futures jumped 7.91% to $59.19 per barrel. Earlier on Monday, Brent spiked as much as 19% to $71.95 a barrel, while U.S. crude jumped more than 15% to a session high of $63.34 a barrel.
Shares of oil companies in Asia Pacific surged on Monday. Australia’s Woodside Petroleum jumped 4.31% and Santos gained 4.87%. Over in South Korea, S-Oil saw its stock gain 2.31%. Hong Kong-listed shares of Chinese oil titan Petrochina also soared 4.97% while CNOOC skyrocketed 7.23%, as of their final hour of trading.
Over the weekend, drone attacks hit the heart of Saudi Arabia’s oil production facilities in Abqaiq and Khurais claimed by Yemen’s Houthi rebels. Half the country’s oil production was halted due to fire damage and an assessment of the situation is due on Monday, Saudi energy ministry officials said.
National oil company Saudi Aramco is attempting to restore about a third of its crude output by Monday following the attacks, the Wall Street Journal reported Sunday.
Strategists at Commonwealth Bank of Australia said the uptick in crude prices may not last.
“The drone attacks have hit the oil market at a time when there is a global oil glut and global growth is weak,” they wrote in a note. “Consequently, the impact on oil prices and global growth is not expected to be significant or last long.”

China industrial output growth slows further

China’s industrial production growth saw its slowest pace in 17 and a half years in August, rising just 4.4% year-on-year.
That came in below a forecast of a 5.2% year-on-year increase by analysts in a Reuters poll. Industrial output growth in the country saw an expected drop to a more than 17-year low in July.
“I think it is very much a bottoming process that we’re seeing in the Chinese economy,” Leon Goldfeld, multi-asset portfolio manager at J.P. Morgan Asset Management, told CNBC’s “Street Signs” on Monday.

Currencies

The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 98.192 after seeing highs above 98.8 last week.
The Japanese yen, often seen as a safe-haven currency in times of market turmoil, strengthened to 107.85 against the dollar after seeing lows above 108.0 late last week.
The Australian dollar changed hands at $0.6873 after rising from levels below $0.684 in the previous trading week.
— Reuters and CNBC’s Natasha Turak contributed to this report.