While share markets globally will be watching this week’s interest rate decision of the US Federal Reserve, their immediate attention will be on the fallout from the weekend attacks on key oil facilities in Saudi Arabia.
Oil prices will rise sharply when trading resumes in Asia and spills over into European dealings while traders wait for more information from the Saudis about the impact of the attacks and any delays to production and shipments.
The Saudis are likely to try and play down the highly embarrassing attacks which took them totally unprepared for the use of drones by Houthi rebels from Yemen (who have relied on a limited number of missile attacks and the occasional use of drones in the past).
This time around 10 drones were used in coordinated attacks on the key facilities in Eastern Saudi Arabia which included a major oil field and the world’s largest oil stabilisation plant responsible for processing up to 7 million barrels a day or more than half the country’s 10 million barrels a tonne output).
So while last week was positive for ASX notch with a small gain of 0.2%, that is now very much forgotten.
The ASX 200 rose 14.3 points over the week to end at 6.,669.2.
A soft US market on Friday saw ASX 200 futures fall 7 points, or 0.1%, pointing to a flat/slightly soft start to trade for the Australian share market later this morning.
The Saudi attacks happened on Saturday, well after the markets had closed so the impact on sentiment is impossible to know – the ASX could start weaker than forecast or we could see a surge in activity.
More likely the initial reaction to the attacks will be a flight to safe haves with bond yields dipping, gold and silver rising and oil jumping in an initial burst of activity.
The prices of ASX listed gold and oil stocks – such as Newcrest, Saracen, Woodside, Santos, Oil Search, Northern Resources, St Barbara – will take a run this morning while traders wait for further news.
The AMP’s Shane Oliver said the “Australian share market was led higher last week by financials (as banks benefited from rising housing finance), utilities and resources stocks but with gains being constrained by a rotation out of IT and defensive health, consumer staple and real estate stocks.”
With global confidence returning bond yields continued to back up (the 10 year yield ended at 1.15%) as did the Australian dollar which ended at 68.79 and in sight of 69 cents.
Metal and iron ore prices (See separate story) also rose but oil fell on talk of easing Iran tensions. But the oil market will dominate investor attention today.
