By Joe Easton
We start the week with a record intraday jump in the price of oil, with Brent crude futures surging as much as 20% as Saudi Arabia rushes to restore oil production after a drone strike on a key Aramco facility cut its output in half, removing about 5% of world supply. Washington is standing by to deploy U.S. emergency oil reserves, while the assault, claimed by rebels in Yemen but blamed on Iran by the U.S., also demonstrates just how vulnerable the Saudi economy is to escalating tensions in the region. These are Saudi Arabia’s options going forward.
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, while Saudi Arabia stocks declined, with the Tadawul All Share Index falling as much as 3.1%. Treasury yields jumped to six-week highs at the end of last week and global equities are coming coming down following a three-week advance. Markets in Japan are closed Monday for a holiday.
Prime Minister Boris Johnson is still sticking to his Oct. 31 Brexit deadline, refusing to ask the European Union for an extension and writing in a column that his government is working “flat out’’ to achieve a deal. Brexit Secretary Steve Barclay said that progress is being made on reaching a deal with the EU. Meanwhile, former PM David Cameron has berated Johnson in his new book, claiming he only backed the leave campaign in order to further his own career.
There’s further signs that China’s current stimulus policies may not be enough to shield its economy from the worsening effects of the trade war with the U.S, as data showed growth slowed further in August. Industrial output rose 4.4% from a year earlier, versus a median estimate of 5.2%, while retail sales and fixed-asset investment also fell short of the forecast increase. The industrial output reading was the lowest single-month figure since 2002.
In Spain, King Felipe VI will meet with party leaders to decide whether there is a candidate able to win a parliamentary vote and form a government. If there’s not, there’ll likely be an election in November. There’s not much else on the data slate after those Chinese numbers, but in corporate news, we’ll get an update from fast fashion giant H&M.