Concerns about geopolitical tensions has weighed on stocks today.
The attack in Saudi Arabia over the weekend has left traders feeling uneasy, so we have seen a dip in equities due to the incident. Before the attack took place, stocks in Europe were broadly at multi-week highs, so some profit taking has occurred.
The underwhelming data from China yesterday added weight to the argument the country is slowing down. HSBC as well as Prudential lost today as the finance houses have large exposure to the second-largest economy in the world. China is a major import of metals, hence why Glencore, BHP Billiton plus Rio Tinto finished the day in the red. The aggressive turn lower in the oil market in the wake of news that Saudi Arabia hope to be back to full oil production capacity in a few weeks, hit BP and Royal Dutch Shell.
Sirius Minerals announced it has scrapped plans to raise $500 million from a bond issue. The stock took a beating on the back of the update as that planned bond issuance is crucial to the long-term financing of the group. Sirius has an agreement in place with JPMorgan, where the bank will provide $2.5 billion in financing, but first, Sirius are required to raise $500 million themselves. The news today puts the whole operation at risk, as cash in king, and the poor investment climate could leave the company out in the cold for some time. The miner will carry out a strategic review of the business, and it is now seeking a ‘major strategic partner’. Sentiment is likely to remain sour until long-term financing is secured.
US
The Dow Jones is holding above the 27,000 mark, while the S&P 500 eyes the 3,000 level. Dealers are worried about the state of politics in the Middle East, hence why are were seeing cautious moves on Wall Street. For the time being, the US-China trade story has dipped off the radar. For the next few days the Fed will be in focus. The central bank are expected to lower interest rates, but they might not be as dovish as some traders are expecting, just like the ECB.
Kraft Heinz shares are in the red on the back of the news that 3G Capital, their second-largest investor, sold-off more than 25 million shares in the company. After the share sale, the private equity group still owns a 20% stake in the food firm. The move by 3G comes one month after Kraft Heinz delayed the release of its quarterly numbers, while posting a write-down too.
FX
EUR/USD has managed to pull back some of yesterday’s losses, but the currency pair remains in its wider trend. A broad move lower in the greenback has assisted the euro. The German ZEW economic sentiment reading was -22.5, which topped the -37 forecast, in addition it was an improvement on the -44.1 reading in August. Economic sentiment is clearly weak, but at least it is heading in the right direction.
GBP/USD is higher thanks to the softer US dollar. The Federal Reserve interest rate decision is tomorrow, plus there is talk the central bank will cut rates. President Trump has been demanding the Fed cut rates for some time now, but the central bank might hold fire seeing as the European Central Bank didn’t deliver as dovish of an update as expected.
USD/CAD jumped on the back of the severe sell-off in oil. The Canadian dollar is sensitive to the energy market in light of its oil reserves, and fall in the energy has weighed on the Canadian dollar. It is worth noting that Canadian manufacturing sales declined by 1.3% in July, and that added to the upward move in the currency pair.
Commodities
Gold is slightly higher due to the softer US dollar, as well as the uncertainty in stocks. The metal has had an inverse relationship with the US dollar in recent months, hence the slip in the greenback is assisting the commodity. Gold is back above the $1,500 mark as traders are cautious of equities at the moment. The mild risk-off attitude of dealers is propping up the metal.
WTI and Brent crude tumbled on the back of the news that Saudi Arabia will return to full oil production capacity with 2-3 weeks. The announcement triggered a wave of selling as traders were fearing the worst on the back of the attack. Should the Saudis get back to normality in terms of oil production in the next few weeks, the energy could fall further.
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