Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Global stock markets are extremely edgy today as investors worry about rising tensions in the Middle East.
Last weekend’s attack on Saudi Arabia’s massive oil facility at Abqaiq, and America’s threat of military response, has knocked shares around the world and driven oil prices alarmingly higher.
Fears of supply shortages drove crude prices alarmingly higher on Monday, up over 14%. Brent crude spiked to $69 per barrel, the biggest one-day jump since the 1980s. US crude finished at $62, the biggest one-day move since the financial crisis.
The jump in oil prices has hit airline stocks. Higher crude prices could mean slower global growth — hurting banks, industrial firms and consumer goods makers.
Last night, the US Dow Jones lost 142 points, or 0.5%. Stocks have fallen in Asia overnight, with China’s CSI 300 index losing 1.7% and Hong Kong’s Hang Seng dropping by 1,5%.
Donald Trump has insisted that he doesn’t want war in the Middle East, but Washington are also insisting the attacks has Tehran’s fingerprints on it.
Stephen Innes, Asia Pacific market strategist at AxiTrader, says investors worry that an oil price shock could push the global economy down:
Global equity markets are stabilising after the drone attack but remain in a state of limbo trying to access the economic damage of a possible lengthy oil price shocker, keeping in mind that every recession since 1973 has included an oil price shock, versus the favourable medium-term S&P 500 correlation to higher oil prices.
All the while, nervously evaluating the possibility of a joint military response from the U.S. and Saudi Arabia.
The other big news of the morning is that WeWork, the office space sharing firm, has postponed its controversial stock market flotation.
WeWork was forced to pull its IPO after getting a lukewarm, bordering on chilly, reception from potential investors.
The office sharing firm was once valued by major investor SoftBank at $47bn (£37.8bn), but was forced to slash its ambitions as Wall Street baulked at its heavy losses, complicated corporate structure, and founder Adam Neumann’s grip on the company.
It had been planning an investor roadshow to market the shares this week, ahead of a trading debut next week – but this is now on pause.
This is obviously a blow to the company, which had been under pressure to complete the IPO to unlock new funding.
As the Financial Times puts it:
The delay to the IPO will also block WeWork from accessing a $6bn loan that had been provided by a consortium of banks, contingent on a successful IPO this year. If WeWork is unable to finalise its listing in 2019 it could be forced to draw up new financing plans.
While the company is still set to receive a $1.5bn capital injection from SoftBank in 2020 as part of an earlier agreed deal, the cash cost of its global expansion has depleted its reserves and proven a key issue for investors.
Traders will also have a eye on the UK Supreme Court. Eleven of Britain’s top judges will hear today whether Boris Johnson acted unlawfully when he advised the Queen to suspend parliament for five weeks.
- 10am BST: ZEW survey of German investor confidence
- 2.15pm BST: US industrial production figures for August (forecast to rise by 0.2%, up from -0.2%).