Investing.com -- World markets react to the attacks on Saudi Arabian oil facilities with a spike in crude prices. Meanwhile, GM workers head out on strike, and British PM Boris Johnson meets EU Commission President Juncker in an attempt to resolve the Brexit deadlock. Here's what you need to know in financial markets on Monday, 16th September.
1. An Oil Shock
President Donald Trump said he would authorize releases of crude from the U.S. Strategic Petroleum Reserve to keep the oil market well supplied after drone strikes knocked out over half of Saudi Arabia’s oil processing capacity at the weekend.
Trump also said he had “informed all appropriate agencies to expedite approvals of the oil pipelines currently in the permitting process in Texas and various other States.”
Oil prices spiked to their highest since May over the weekend as the attacks not only halted 6% of the world’s oil supply but also raised the specter of war between the U.S. and Iran, threatening further and wider disruptions to supply, inasmuch as Secretary of State Mike Pompeo had earlier blamed Iran for the attacks. Iran said it was ready for “fully-fledged war”, while Trump said the U.S. was “locked and loaded” while waiting for Saudi Arabia to verify Washington’s suspicions.
By 6 AM ET, the U.S. benchmark WTI futures contract was at $59.42 a barrel, up 8.4% from late Friday but down from a high of over $61 a barrel over the weekend. The international benchmark Brent was at $65.58 a barrel.
2. Chinese economy under pressure
The latest economic data out of China continued to show an economy under increasing stress from not just the trade war but decades of over-investment and debt-driven growth.
Industrial production grew at the slowest rate since 2002 in August, according to data compiled by Investing.com, while growth in retail sales and fixed asset investment also fell short of expectations.
The figures are all the more surprising against a backdrop of expectations that the figures could be massaged higher ahead of celebrations in October marking the 70th anniversary of the Communist Party taking power.
Closer to home, the data calendar is led today by the release of the New York Empire State Manufacturing survey at 8:30 AM ET (1230 GMT).
3. Stocks set for lower open
U.S. stock markets are set to open lower in the wake of the news out of the Middle East.
By 6 AM, Dow 30 and the S&P 500 futures contracts were both down 0.4%, retreating further after failing to post new all-time highs on Friday. The Nasdaq 100 futures contract was down 0.3%.
Sectors likely to be in the spotlight Monday include oil and gas, which can look forward to windfall gains, and airlines and logistics companies, which will have to factor in higher fuel costs.
Asian and European stocks traded broadly lower, with the Chinese data reinforcing to the negative tone.
4. UAW strike hits GM
Nearly 50,000 General Motors (NYSE:GM) workers went on strike Monday in search of higher pay and investment commitments, the biggest industrial action to hit the company since 2007.
Workers shut down 33 manufacturing locations and 22 parts components distribution centers across the U.S.. It isn’t clear how long the walkout will last but talks between the two sides are due to resume at 10 AM ET.
The United Auto Workers union has made GM its target company this year, and any agreement it seals will be used as a template for negotiations with Ford Motor (NYSE:F) and Fiat Chrysler (NYSE:FCAU) too.
5. Johnson to meet Juncker amid Brexit deadlock
The British poud is consolidating just below the six-week highs that it posted at the end of last week as fears of a disorderly Brexit ebbed.
U.K. Prime Minister Boris Johnson will meet today with outgoing European Commission President Jean-Claude Juncker over how to bridge the differences between the two sides, which revolve mainly around the future regulatory treatment of the British province of Northern Ireland.
Neither side has much room for political maneuver, and a major breakthrough is seen as unlikely. However, Johnson’s hand has been strengthened by opinion polls at the weekend showing his Conservative Party still holding a clear lead over rivals as he consolidates the “Leave” vote ahead of a likely General Election later in the fall.