By Joyce Yu
Philadelphia, PA–Oil prices surged to the highest levels in more than two years to $57 per barrel after the Saudi crown prince purged a number of princes and ministers.
“Conflicts within the Middle East are becoming a major influencer on energy markets, and a further surge in [oil] prices will likely be due to political risk,” said Hussein Sayed, chief market strategist at trading platform FXTM.
“We have stressed repeatedly that the biggest ‘risk’ to our conservative (oil) price forecast is a destabilization of the situation in Saudi Arabia,” commodity analysts at Commerzbank AG wrote in a note to clients Monday. “The probability at least of such a scenario increased at the weekend after eleven princes, four ministers and dozens of former ministers were arrested in Saudi Arabia.”
Oil stocks including Chevron and Exxon Mobil, as a result, soared Monday, bolstering U.S. stocks to record highs, which was helped in part by optimism about merger activities.
21st Century Fox was reported to have been in talks to sell key assets including its movie studio, television production unit and entertainment networks to Disney. Fox whose shares gained 10% on Monday, would keep its news and sports holdings and its broadcast network. But several other reports said the talks were no longer active.
The S&P has risen about 15% in 2017 on the back on strong earnings, an improving economy and Trump’s promise to cut taxes. “While the market remains in place for further gains, the unwinding of the earnings season is likely to slow the pace of gains as the battle of tax reform lurks in the background,” said Peter Cardillo, chief market economist at First Standard Financial.
“The U.S. economy really bottomed out during the summer and has been on a clear upward trend since then,” Jon Adams, a Chicago-based senior investment strategist with BMO Global Asset Management shared with the Bloomberg. “Investors are digesting payrolls figures from Friday as well as tax reform prospects right now. But payrolls in particular really solidified our view that we’re on solid economic footing and there’s really no reason for central banks to get too carried away as far as rate hikes right now.”
Investor turn their attention to a much-awaited cut in corporate taxes as earnings season winds down. Negotiations on President Donald Trump’s tax bill have begun after House Republicans last week unveiled a first draft that proposes a range of cuts aimed at helping businesses, including slashing the corporate rate to 20% from 35%.
All eyes will also be on the Asia trip by President Trump who will be visiting South Korea and China this week. “The good old macro story is still running behind the scenes, so I don’t see Trump headlines offering much impact on the markets this week,” said Mark McCormick, North American head of foreign-exchange strategy at Toronto-Dominion Bank.
