Stock markets in Europe are lower on the news that oil production sites in Saudi Arabia were targeted by drones over the weekend. 

Europe

Capacity has been severely curtailed, but a large portion of the lost production has been restored. Tensions are running high in the Middle East, and the uncertainty surrounding the situation is likely to hang over the markets in the near-term. At the end of last week’s trading session, European stock markets were in good shape, the Saudi situation provided traders with an excuse to exit their equity positions. The FTSE 100 is in the red, but it is holding up than some of the eurozone indices, thanks to the rally in BP and Royal Dutch Shell. On the other side of the oil divide, Wizz Air, Ryanair and Carnival shares are in the red as the companies are likely to be hit with higher fuel bills.  

Tullow Oil shares surged today on the back of a report that it made a successful discovery. The operation is in Guyana, and it is a part of the Joe-1 scheme. The group ‘made back-to-back discoveries in Guyana’ and its management are looking forward to the next phase in the programme, and it has the potential to ‘unlock multi-billion barrel potential’. The stock hit a level last seen in April, if the bullish run continues it might retest the 280p area.

Petra Diamonds posted a 22% drop in yearly profit to $153 million, which undershot the consensus estimate of $172 million. The company cited global trade tensions and unrest in Hong Kong for the subdued demand, and the company’s CEO, Richard Duffy, expects the market to remain under pressure. The company is undergoing a restructuring scheme and it aims to boost cash flow, while cutting debt.     

US

The Dow Jones is in the red and the S&P 500 is a little below 3,000 as traders are nervous about the situation in the Middle East. Stocks rallied last week as US-China trading relations improved, and in light of the events over the weekend in the Middle East, traders are lowering their attitude to risk, and the major indices are a little lower. The US manufacturing sector is suffering as the slowdown in China and Europe have taken their toll on the industry, and now that oil has surged, the sector is likely to feel further pain. The timing of the drone strikes in Saudi Arabia was pretty awful, when you consider what is going on in China, the US-China trade spat, the unrest on Hong Kong, and the uncertainty over Brexit.

The New York manufacturing index reading was 2, which undershot the 4.1 forecast, and it was the lowest reading in three months.

Lyft and Uber shares are in demand today after HSBC upgraded both stocks to buy from hold. The bank lowered its price target for Lyft to $62 from $67, and the finance house now has a price target of $44 for Uber, while the previous one was $49. HSBC claimed that worries in relation to regulations are already factored into the price.    

FX

US dollar index has rallied today and it has weighed on the GBP/USD and EUR/USD. The greenback has come under pressure recently, and today were are seeing a reversal. There has been a slight move to risk-off sentiment, and traders are pouring funds in the US dollar. It was a quiet day in terms of economic reports, so traders didn’t have much to go on in terms of news stories.  

Commodities

Gold is back above $1,500 as dealers seek out assets that are deemed to be lower risk. The concerns about tensions in the Middle East has prompted traders to drop stocks and snap up gold. Recently, gold has been hurt by a firmer US dollar, but it rallied today despite the stronger dollar, which underlines the demand for the metal.

WTI and Brent crude have surge today in the wake of the drone strikes that knocked out a major portion of Saudi Arabia’s production capabilities. Traders despise such uncertainty, and such a high profile attack could bring about a further escalation in tensions, and traders are fearing for the worst.    

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