A One Off Event?

By now you have read about the attacks on the Saudi oil fields this weekend. For us, the question is not an issue of the short term effect, where oil prices rose as much as 11% last night. Rather a question of whether this leads to more of this type of disruption, and if it will lead to a retaliation against the perpetrators (whoever they may be).  The question is if the oil market will need to price in the danger of disruption on a frequent basis, thus driving up the longer end of the pricing curve or was it a one off incident?

Brexit:  We still think the UK leaves on October 31st Deal or NO Deal…….

Economic activity in China slowed in August

We are hearing less about HK, as media folks have short attention spans, but it is still an issue for China and Asia.

We get the Fed (.25% cut), Japan (cut likely), Switzerland (cut likely), UK (no change) and Norway central banks this Thursday.  (Norway is 50/50 on hike)

This week we also get economic releases, but it is the central banks that will dominate the markets focus:

US industrial production Tuesday

UK CPI and PPI Wednesday

Australia unemployment Thursday

US Philly Fed Thursday

Crude oil spiked higher on back of the attacks on Saudi oil installations. Calmer heads are prevailing this morning as it looks to close the overnight gap. We still think we are in for higher levels in the weeks ahead.

The VIX index was not influenced by the spike in oil, nonevent for equities.

Gold, often the beneficiary of negative geopolitical events, bounced only slightly on this weekends events.  Holding around the $1,500 level for now.

Current focus:

Brent Crude:  Range $62.50 to $68.00  based on dovish central banks and market expectations of positive trade developments.  This weekends incident may be a reason for a bit of price uncertainty going forward.

Gold: We like buying on dips to $1,480, looking for test and break of the $1,550 level on the back of dovish central banks and geopolitical issues.

FX:  EURUSD in range, wait for break out.  NOK, think it holds against EUR and USD until Norges bank meeting Thursday.  Like CAD.

Equities:  Would be hedging gains or looking to sell on signs of weakness in high yield market. 
Trading: prefer shorts against highs with tight stops. https://www.wsj.com/articles/junk-debt-sends-early-warning-signals-11568545201

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