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Oil Prices Spike More Than 10%, Equities Move Lower, The FOMC Meets This Week

Thomas Hughes

U.S. Equities Fall As Oil Prices Rise

U.S. futures are indicating a lower open after a surprise attack on Saudi oil infrastructure sends energy prices skyrocketing. A missile fired from Yemen struck the Abqaiq oil processing facility knocking out half of Saudi Arabia’s production. The attack effectively wiped out 5% of the global supply and raises the odds for a global recession. Energy-dependent industries like airlines and travel & leisure were hurt the worst. Shares of Boeing are down about -0.75% while American Airlines is down more than -4.0%.

The tech-heavy NASDAQ Composite is in the lead in early trading with a loss of -0.45%. The Dow Jones and S&P 500 are both down about -0.25%. In other news, shares of GM are moving lower after the UAW strike intensified. The UAW has called for a nationwide strike that will have a dramatic impact on GM profitability. Shares of GM are down more than -2.25%.

Traders are cautioned not to forget about the FOMC this week. While the spike in oil prices is a major concern it is not the only thing driving the market. The FOMC is expected to cut rates by a quarter-point but their outlook for future cuts is likely to disappoint the market.

Europe Moves Lower

European markets are moving lower in early Monday trading. The CAC is in the lead with a loss near -0.60% while the DAX and FTSE trail at -0.45% and -0.25%. Energy stocks are the big winners today, up 5% to 11%, while travel & leisure stocks fall -1.5%. Travel stocks were further hurt by a ruling from the WTO. The WTO says the U.S. may put tariffs on EU aircraft to fight unfair subsidies. EU airlines and aircraft manufacturers fell -4.0% on the news.

In political news, the UK Prime Minister is meeting with EU officials this week. He says the next few days are critical for a Brexit deal. Johnson has said he will drop the Irish-Backstop despite the EU’s claims the measure is non-negotiable. In Italy, the Prime Minister has thrown a wrench into the new coalition government-works. According to reports, he is trying to form a centrist movement that would effectively break the newly-formed coalition government.

Asian Markets Are Mixed On Monday, Chinese Industrial Production Is Weak

Asian markets are mixed after Monday’s session. The Shanghai and Hang Seng both posted losses, the Hang Seng leading at -0.83, while the ASX and Kospi both moved higher. In China, Industrial Production figures came in at +4.4% in August, well below the 5.2% expected by economists. The figure is a new 17.5 year low. Chinese Premier Li Kiquiang says it will be hard for China to sustain 6.0% growth due to the law of large numbers.

This article was originally posted on FX Empire

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