European stocks suffer from Saudi attacks, but oil firms soar

Traders walk past the German share price index DAX graph at Frankfurt’s stock exchange in Frankfurt March 14, 2019. — Reuters pic
Traders walk past the German share price index DAX graph at Frankfurt’s stock exchange in Frankfurt March 14, 2019. — Reuters pic

BERLIN, Sept 16 — European shares fell today after four straight sessions of gains as attacks on crude facilities in Saudi Arabia and weak Chinese data added to worries over global growth while boosting shares in unaffected oil producers.

The drone attacks on the weekend, which cut more than 5 per cent of the global oil supply, sent crude prices soaring as much as 19 per cent and pushed the oil & gas index 2.4 per cent higher, driving roughly 3 per cent gains for majors BP and Shell.

UK and Irish-based explorer Tullow Oil jumped 7 per cent, to the top of Europe’s STOXX 600, after the firm said it plans to drill three or more exploration wells in Guyana next year following its second oil discovery in the country.

All other major European sectoral indexes fell, with travel and leisure the worst hit with a 1.0 per cent slide, dragged down by shares of airlines Ryanair Holdings, Air France KLM SA and EasyJet PLC.

“Usually, higher oil prices are a product of higher demand, but in a scenario like this where supply is squeezed because of an attack, that is the worst of both worlds,” said David Madden, market analyst at CMC Markets.

“China’s economy is clearly fuelling down; things in the US-China trade situation are looking a bit better but not good; Germany is potentially looking toward a recession. The last thing the global economy now needs is a surge in oil prices.”

Adding to some weak indicators from China last week, industrial production in the world’s second largest economy grew at its weakest pace in 17-1/2 years in August amid rising US trade pressure and softening domestic demand.

The pan-European STOXX 600 index and trade-sensitive German shares were both down 0.6 per cent.

European stocks ended Friday with their fourth straight weekly gain, as investors circled back into cyclical sectors amid signs of progress in US-China trade talks.

The European Central Bank also cut rates deeper into negative territory last week and relaunched bond purchases with no scheduled end-date, laying down a marker that it would continue to do all it could to support euro zone growth.

Market participants are now looking to the US Federal Reserve’s policy meeting starting Wednesday, where the central bank is widely expected to ease interest rates and signal further moves.

In other corporate news, Volkswagen was down 0.5 per cent as the automaker agreed to pay up to US$127 million (RM529.4 million) to settle lawsuits brought on behalf of thousands of Australian customers caught up in its global diesel emissions cheating scandal. — Reuters

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