It’s a very jittery start to the week amid the Khashoggi standoff, US-China trade tensions and concern about US borrowing costs. Follow all the action live
The losses continue to mount up on financial markets amid uncertainty across the world about trade, rising US interest rates and now a potential clash between the US and Saudi Arabia over the fate of missing journalist Jamal Khashoggi.
The Saudi tension has sent the price of oil up and it’s also been a rough night for the pound ahead of this week’s crunch Brexit summit with sterling slipping. The yen meanwhile has strengthened a touch against the dollar.
It will be fascinating to see where the price of oil goes this week. Brent futures have risen 1.255 today to $81.5 a barrel and that could rise to $100 according to one analyst.
Kazuhiko Fuji, senior fellow at the Japanese government thinktank, the Research Institute of Economy, Trade and Industry, said:
Oil prices could rise to $100 on worries about Saudi Arabia. People had thought the Saudis will make up for fall in Iran’s output. If they are starting to use oil as their weapon, that will be a whole new chapter.
Apologies – I jumpped the gun on the Aussie market. The final settlemtn pushed it deeper into the red to end down 58.6 points, or 0.99%, at 5837.1 points.
Sears, the venerable US retailer, has gone into administration. It has filed for chapter 11 bankruptcy, according to a filing in a New York court, Reuters reports.
The ASX200 is done for the day. It finishes down 46 points, or 0.79%, at 5,849 points.
Saudi Arabia has threatened to retaliate against the world economy if western nations impose sanctions or similar if it emerges that the country’s security forces murdered the journalist Jamal Khashoggi.
We seem to have hit a fairly quiet spot in the trading day.
The ASX200 in Sydney is down around 1% and is due to close in a few minutes.
Talking of China, it’s worth revisiting comments by the country’s central bank governor at the close of the IMF meeting in Bali on Sunday.
Yi Gang said China still had plenty of room for adjustment in interest rates and the reserve requirement ratio (RRR) in the face of any negative impact from trade tensions with the United States.
Chris Weston of Pepperstone in Melbourne has weighed with some commentary, saying things could quite ugly on stock markets if data out of China – inflation, GDP and retail sales – disappoints later in the week.
After last week’s volatility shock to markets, we start the week on a negative tone, with broad weakenss through Asia and the ASX 200 falling out of bed. The weekend news flow has centred on a lack of progress in the Brexit negotiations, a deterioration in Saudi/US relations, which have resulted in a 1.1% rally in crude, and the loss of majority for the CSU party in the German regional elections.
Here are the latest scores, courtesy of IC Markets (although I think they’ve missed the minus sign off the Hang Seng price):
The pound is set for a volatile few days as the wrangling over Brexit intensifies ahead of the meeting of European leaders starting on Wednesday night. It sits at $1.31 at the moment after losing 0.3% today.
The key issue is how to prevent a hard border between Northern Ireland and the Republic. The EU wants the North to remain essentially bound by EU customs rules but that is facing pushback from Brexiters. Theresa May is hoping a temporary “backstop” can be put in place where the whole country remains in the customs deal for the time being.
In presuming to change the constitutional arrangements of the United Kingdom, the EU is treating us with naked contempt. Like some chess player triumphantly forking our king and our queen, the EU commission is offering the UK government what appears to be a binary choice. It is a choice between the break-up of this country, or the subjugation of this country, between separation or submission.
Still with Australia and interesting to note that Shane Oliver, the high-profile chief economist at AMP, has suggested that he might have to revise downwards his forecasts on house prices.
He tweeted on Saturday that the auction results weren’t good but his forecast of a peak to trough fall of 15% out to 2020 remained in place. But he told the AFR that he might hve to rethink that forecast on the downside.
…Domain auction clearances. Auction sales volumes running down 50% from year ago in both Sydney and Melbourne. All consistent with further falls in home prices …our forecast remains for top to bottom falls of 15% out to 2020. Risk on downside. #ausecon pic.twitter.com/SY45iIYpzc
In Australia the ASX200 has had a torrid morning. At one point it was down more than 1.5% but it has recovered at bit and is now at 5,829, a fall of 66 points or 1.1%.
The financial sector has been battered amid concern about the impact of the royal commission on the big four and the amount of compensation they will have to pay. Commonwealth is the worst performing, down more than 2%.
Banks’ share prices have no floor. You have deteriorating housing market which will affect their balance sheets, rising interest rates will do the same. Banks’ share price essentially depends on how bad the bust will be in Oz housing, especially NSW, VIC and WA #ausbiz https://t.co/QFQiohosMy
The Chinese trading day has kicked off.
The Hang Seng is down nearly 1% while the Shanghai Composite is up a fraction.
Another major factor in stock market losses this week has been the prospect of a full-blown US-China trade war. But calls for calm from leaders gathered at the IMF conference in Bali last week seem to have fallen on deaf ears.
The Chinese currency fell again against the dollar today. It’s now at 6.92. That is sure to rattle Washington where there is a widespread view that beijing manipulates the currency to benefit exporters.
While the Ssudi government has come out fighting on the prospect of US sanctions in the Khashoggi case, the boss of the Saudi-owned Al-Arabiya satellite news network has gone a few steps further.
Turki Aldakhil paints an apocalyptic picture of world affairs if the US tries to get tough on the Saudis. He says the kingdom would respond by slashing oil output and would team up with Russia and stop buying US arms. The US would be “stabbing itself to death”.
Imposing any type of sanctions on Saudi Arabia by the West will cause the kingdom to resort to other options, US President Donald Trump had said a few days ago, and that Russia and China are ready to fulfill Riyadh’s military needs among others. No one can deny that repercussions of these sanctions will include a Russian military base in Tabuk, northwest of Saudi Arabia, in the heated four corners of Syria, Israel, Lebanon and Iraq.
At a time where Hamas and Hezbollah have turned from enemies into friends, getting this close to Russia will lead to a closeness to Iran and maybe even a reconciliation with it.
The list of marquee speakers at the Future Investment Intiative conference in Saudi Arabia next week makes interesting reading because a few of them have now said they will not be going.
Jamie Dimon has pulled out along with the boss of Uber and the editor of the Economist, Zanny Minton-Beddoes, while US treasury secretary Steve Mnuchin is under pressure not to go. Watch this space for more.
The rise in oil prices is gathering pace too.
Brent futures are up 1.3% to $81.54 a barrel.
The sellers are gaining the upper hand in stock markets around Asia Pacific today. Hong Kong and China open later this morning. But this is how it’s looking so far:
Bill Ford, the chief executive of Ford, has become the latest high-profile business leader to pull out of the Future Investment Initiative conference in Riyadh later this month, Reuters reports.
He joins JP Morgan boss Jamie Dimon in announcing his withdrawal on Sunday. Neither cited a reason but it is suspected that the diplomatic standoff over the Khashoggi affair would be high on the list.
Trading is under way in Japan and Korea. The Nikkei is off 1% and the Kospi is down 0.5% in Seoul.
That seems par for the course today given the poor start in Sydney, where it’s now off 0.89% for the day. The question is whether the markets can bounce back or they are dragged lower by a compound of problems …
The price of Brent crude has risen this morning to $80.5 a barrel.
It’s surely connected to the Saudi issue, so it’s worth looking again at what the kingdom has said about possibly retaliating to external pressure over the Khashoggi affair.
The kingdom affirms its total rejection of any threats and attempts to undermine it, whether through economic sanctions, political pressure or repeating false accusations. The kingdom also affirms that if it is [targeted by] any action, it will respond with greater action.
Brent crude, the global oil benchmark, earlier this month hit a 4-year high above $85 a barrel. Oil Weapon? Saudi Arabia used its petroleum resources as a political weapon when it led an Arab oil embargo during the 1973 war between Israel and a coalition of Arab states. Since
watch the #BRENT crude opening price tomorrow to realize the Saudi deter.
we are not a warmongers but if the enemies starts to blackmail us we are ready to play the game
the #Saudi_Arabia never used an assassination and will never do it.
we are disappointed from our allies!!
The standoff between Saudi Arabia and just about everyone else in the world over the disappearance of journalist Jamal Khashoggi looks like intensifying. The Saudis have promised pushback if Donald Trump carries out his threat of “severe Punishment” if the kingdom is found to have disposed of Khashoggi, as alleged by Turkey.
Now, Reuters report that JP Morgan Chase chief executive Jamie Dimon has cancelled plans to attend a Saudi Arabian investor conference later this month.
In currencies, the US dollar has gained a bit today. That means the Aussie dollar is down slightly at US71.07 while the yen has slipped to 112.2. The pound is at $1.31.
The benchmark ASX200 has slipped around 1% in the first few minutes.
The banks, as usual of late, have been sold with the financial sector down 1.47%. Same for resources which are down more than 1% but utilities are off 2%.
#ASX200 deeply oversold. We should get back to at least 6102/6140 by early next week before a retest of Friday’s low kicks off.
More commentary on the Australian market from Michael McCarthy at CMC Markets. His thrust is that this week sees a lot of data from China including lending, retail sales and GDP which should give us a picture of where the superpower is heading, ie is it in good enough shape to survive a trade-war inspired downturn? There’s also inflation and trade data from Japan, retail sales in the UK and in the US, retail sales, housing numbers and Fed minutes.
Here’s what Michael says:
Australian investors face a challenge at this morning’s opening. Despite positive moves for US shares and buoyant industrial commodities SPI futures were belted at the New York close, suffering a 51 point loss for the session. The first hour of trading may indicate whether this was an error or the beginning of further underperformance for Australian shares.
Greg McKenna, the independent market strategist, says the markets narrative has been hijacked by the Saudi pushback and Brexit but reckons it’s a close call on what direction things will take.
This is what he says in his morning note:
Much water to flow here especially for the Pound and oil prices. Looking back to Friday though and while stocks in the US rallied into the close it was a messy day and hardly a convincing bounce. Is it the bottom? Many think so and the medium-term charts recovered to hold channel bottoms. But we’ll see.
Good morning and welcome to the Guardian business live blog.
We’re firing up a bit earlier than usual today because it looks like being an interesting session in Asia Pacific markets.