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US stocks fall after Saudi attacks, China data miss; oil prices spike

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US stocks fall after Saudi attacks, China data miss; oil prices spike

Geopolitical tensions on the rise after drone attacks on Saudi Aramco plants.

Global stock markets fall, safe haven assets gain.

➤ Treasurys rise; dollar strengthens.

➤ China data miss fuels stimulus expectations.

Concerns about oil supply disruptions in the wake of drone attacks on Saudi Aramco sites sent oil prices higher, with the resultant rise in geopolitical tensions and disappointing Chinese economic data weighing on global stocks Sept. 16.

The S&P 500 and Nasdaq 100 were down 0.4% and 0.6%, respectively, around 9:50 a.m. ET. European shares also traded lower. The FTSE 100 fell 0.3%, France's CAC 40 dropped 0.7% and Germany's DAX index was down 0.5%.

In Asia, the Shanghai SE Composite was flat and Hong Kong's Hang Seng index lost 0.8% as Chinese retail sales and factory output data missed estimates in August. Growth in these indicators, along with capital expenditure, is unlikely to rebound strongly anytime soon, increasing the chances of further policy easing in the coming months, said Martin Rasmussen, China economist at Capital Economics.

The Japanese equity market was closed Sept. 16.

European oil giants gained as oil prices spiked in the wake of drone attacks on Saudi Arabian Oil Co.'s Abqaiq and Khurais oil-processing plants Sept. 14 by Yemen's Houthi rebel group. The kingdom's oil production was reportedly cut nearly in half by the incident, with output reduced by up to 5 million barrels of oil per day, representing roughly 5% of global supplies per day.

U.S. President Donald Trump authorized the release of crude from America's petroleum reserves to keep the markets well-supplied, as Aramco was reportedly working to restore production.

TOTAL SA's stock rose 3%, BP PLC gained nearly 5% and Royal Dutch Shell PLC's shares in Amsterdam were up 3.4%.

Brent crude oil surged 10.3% to $66.43 per barrel on the ICE Futures Exchange and West Texas Intermediate gained 9.6% to $60.13 per barrel on the New York Mercantile Exchange in the wake of the attacks.

In the foreign exchange market, currencies of oil exporting countries gained, with the Norwegian krone up 0.1%, the Canadian dollar rising 0.3% and the Russian ruble appreciating 0.5% against the U.S dollar.

Among oil importers, Turkey's lira and India's rupee depreciated 0.5% and 0.9%, respectively.

The surge in oil prices suggests that markets were under-pricing negative supply side risks, according to Lee Hardman, currency analyst at MUFG Bank, and oil prices are expected to remain high. "Downside risks for the global economy would intensify if geopolitical risks in the region continue to escalate creating a more unfavorable environment for high beta emerging market and high yielding currencies," Hardman added.

Sterling depreciated 0.4% versus the dollar as U.K. Prime Minister Boris Johnson meets with European Commission President Jean-Claude Juncker in Luxembourg on Sept. 16, with only seven weeks left before the country is due to leave the EU.

The euro dipped 0.5% against the dollar.

Safe havens gained, with the Japanese yen appreciating 0.2% against the dollar and gold adding 0.6%.

In the debt market, Treasurys rose as 10-year yields lost 4 basis points to 1.862% a little before 10 a.m. ET. Yields on the German Bunds with the same maturity fell 2 basis points.

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