Trading View: Top three global stories to follow on Monday

  • Markets
  • Monday, 23 Sep 2019

Aramco facility: Crude oil storage tanks stand at Saudi Aramco’s Abqaiq crude oil processing plant. — Bloomberg

* For a fourth week in row stock markets show that dog days of summer are still far from being over. When everyone thought that nothing worse cannot possibly happen, reality suggests the opposite.

It all started with the innocuous-sounding trade talks between the US and China, however, peer pressure has become an actual trade war that has already negatively affected not only countries directly involved but the whole world economy.

Despite the fact that past week started with China unveiling first list for tariff exemptions on US goods, that was regarded as a goodwill gesture ahead of a scheduled meeting between the two countries, and, shortly thereafter, White House granting tariff exemptions on more than 400 Chinese products, the Dow closed 160 points lower.

The S&P 500 and the Nasdaq Composite also dropped from 0.5 to 0.8%. One of the main reasons for this fall was the cancellation of a scheduled visit by China to US farm country in Montana.

That is why it is crucial to keep an eye on US-China trade war talks. According to the Federal Reserve, uncertainty driven by the trade war could result in hundreds of billions of dollars in lost U.S. output and as much as $850 billion lost globally through early 2020.

As history has shown, in case of the trade war escalation, both American and Chinese benchmarks, including major companies stocks are going to see negative growth.

* Last week the world was shocked by drones attack on two major Saudi oil installations. Several moments later, President Donald Trump twitted that USA is “the Number One Energy Producer in the World” and does not need Middle Easter Oil & gas. In reality, American companies are ready to help their Allies.

Investors thought that it might be a unique opportunity for U.S. energy companies, subsequently buying their stocks. As a result, Chevron Corporation increased by 2.67%, Conocophillips were up 8.10%, Exxon Mobil Corporation saw a 2.18% growth, whereas Devon Energy improved over 11%, Marathon Oil Corporation rose 11.56% and Hess Corporation showed +10.50% change.

Last Friday, the government of Donald Trump announced sanctions on Iran’s central bank and two other major state financial institutions as a punishment for attacks on critical oil supplies in Saudi Arabia. Once again it may have a direct effect on oil market supplies, pushing the prices up. Which is why it is still recommended to follow the news for the next few days, as things might see a complete reversal.

Also, keep in mind that since the beginning of 2019 North American Shale producers have been struggling to keep budgets in surplus, without having to fire workers and cutting production goals. According to Reuters, “they remain under intense pressure from investors to restrain spending and return money to shareholders through buybacks and dividends rather than expand drilling.”

* Careful with European stocks

According to a Bloomberg survey, strategists predict losses of more than 4% in both the Stoxx Europe 600 Index and the Euro Stoxx 50 Index of the region’s biggest companies by the end of the year.

Despite european stocks being on track over the past month, signaling investor optimism in the markets’ bright future, trade war an economic slowdown may still have a brutal effect on european companies. It means that recently approved Quantitative Easing program will not allow to achieve the necessary results.

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trade war , talks , quantitative easing


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