Five Things You Need to Know to Start Your Day
Oil prices surge on Saudi attacks, Hong Kong protests continue unabated and GM workers are striking. Here are some of the things people in markets are talking about today.
For oil markets, it’s the single worst sudden disruption ever. Brent prices spiked early Monday after a strike on a key facility cut Saudi Arabia’s production by half, pulling some 5% of world supply off the market. Saudi Aramco lost about 5.7 million barrels per day of output after several unmanned aerial vehicles on Saturday struck the world’s biggest crude-processing facility in Abqaiq and the kingdom’s second-biggest oil field in Khurais. Saudi Arabia is likely to restore almost half the oil production lost, though a full resumption may take weeks. The Trump administration is ready to deploy the nation’s emergency oil reserves and help stabilize markets if needed.
Hong Kong Protests
Hong Kong’s protests, now in their fourth month, continued unabated over the weekend. Police employed tear gas, water cannons and petrol bombs as both demonstrators and police on Sunday appeared to get more aggressive. Demonstrators set fire to entrances to key subway stations, while others threw petrol bombs at the central government headquarters in the Admiralty district. The tens of thousands of people on the streets chanting “five demands, not one less” showed that leader Carrie Lam’s move to withdraw a bill allowing extraditions to China hasn’t been enough. Protests may only get more intense in the run-up to Oct. 1, when China celebrates 70 years of Communist Party rule. The protests are taking their toll: Hong Kong International Airport handled 6 million passengers in August, down 12.4% from a year earlier.
Oil prices soared and the yen climbed after the strike on the heart of Saudi Arabia’s oil production increased geopolitical risk concern. News of the devastating attack on the world’s largest crude exporter also sent currencies of commodity-linked nations higher, including the Norwegian krone and the Canadian dollar. Treasury futures rose and U.S. equity index futures opened lower. U.S. stocks finished last week mixed as Treasury yields jumped to six-week highs. Equity indexes in Europe and Asia closed the week in the green, thanks to easing trade fears and a new round of central bank stimulus. Markets in Japan are closed Monday for a holiday. Saudi Arabia stocks declined, with the Tadawul All Share Index falling as much as 3.1% after the attacks.
In this week’s rate-decision bonanza, the U.S. Federal Reserve, Bank of England, and Bank of Japan all set monetary policy. The EU Parliament meets as the Brexit impasse rumbles on. Monday China releases August industrial production and retail sales data that will give a glimpse into the state of the world’s second-largest economy amid the protracted trade war. The Federal Reserve is widely expected to lower U.S. interest rates in response to slowing global economic growth and muted inflation when it meets Wednesday. Chairman Jerome Powell will hold a post-decision press conference. The BOJ will unveil its rate decision on Thursday, followed by Governor Haruhiko Kuroda’s briefing. Australian jobs will be closely watched on Thursday. And brace for surging volatility on quadruple witching day Friday when the expiration of futures and options on indexes and stocks occurs on the same day.
General Motors Co. workers called their first strike in 12 years, halting work at dozens of facilities across the U.S. in a clash over jobs, pay and benefits. The United Auto Workers called the strike -- effective midnight Sunday -- despite a deadline-day offer by GM for pay raises, $7 billion of investment in eight U.S. plants and more than 5,400 additional jobs, most of which would be new hires. Lost production may cost GM about $50 million a day in earnings before interest and taxes, Dan Levy, an analyst at Credit Suisse, wrote to clients.
What We’ve Been Reading
This is what’s caught our eye over the weekend.
- Attacks pressure Hong Kong’s world-class subway…
- ...While the city’s property hunters are grabbing bargains.
- China’s bond market just doesn’t move.
- The debate over the effect of a Fed rate cut on stocks.
- Japan’s biggest bank makes foray into Europe’s CLO market.
- Female pilots from the Philippines could help Asia’s travel boom.
- What’s behind the world’s biggest climate victory? Capitalism.
©2019 Bloomberg L.P.