Top 5 Things to Know in the Market on Monday
1. Saudi Arabia, other Middle East nations cut ties with Qatar
Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed their ties with Qatar on Monday, accusing it of supporting terrorism, in an unprecedented breach between the most powerful members of the Gulf Cooperation Council.
The coordinated move dramatically escalates a dispute over Qatar’s support of the Muslim Brotherhood, the world’s oldest Islamist movement, and adds accusations that Doha even backs the agenda of regional arch-rival Iran.
A split between Doha and its closest allies can have repercussions around the Middle East where Gulf states have used their financial and political power to influence events in Libya, Egypt, Syria, Iraq and Yemen.
Qatari stocks plunged in response to the news, with Doha’s QE General Index tumbling roughly 8%, its worst daily losses since the 2009 financial crisis.
2. Oil prices rise on fresh Middle East tensions
Oil prices were higher on Monday, after Saudi Arabia and three other countries severed diplomatic ties with Qatar, fueling concerns over geopolitical instability in the Middle East.
Market participants are sensitive to Middle East tensions because they worry about supply disruptions from the region.
U.S. crude was at $48.05 a barrel, up 39 cents, or around 0.8%, while Brent gained 36 cents to $50.31.
3. Pound shrugs off overnight dip
The British pound pushed higher on Monday, shrugging off a small, brief dip overnight, as market players reacted to Saturday’s terror attack in London – the third attack in Britain in recent months – which left seven dead and scores injured after a van mowed down pedestrians on London Bridge.
The pound was at 1.2899 against the dollar, from 1.2891 in late trading on Friday in New York (GBP/USD). Against the euro, the pound inched up to 1.1452 from around 1.1427 in late trading Friday (GBP/EUR).
On Sunday, U.K. police said they arrested 12 people in east London in connection with the attack. Islamic State has claimed responsibility.
The attack came days ahead of Thursday’s U.K. election, in which polls show British Prime Minister Theresa May’s lead over the opposition Labour Party has narrowed but is still intact.
4. Gold touches 6-week high amid Middle East, London jitters
Gold prices rose to their highest level since April 20 on Monday, with futures touching a daily peak of $1,284.67, as market players monitored mounting geopolitical tension in the Middle East as well as the fallout from the weekend terror attack in London.
Prices of the yellow metal drew additional support after last week’s disappointing U.S. employment report saw investors temper expectations for more rate hikes by the Federal Reserve in the second half of the year.
5. More U.S. data ahead
Market players will focus on more U.S. economic data on Monday for further signs of the Federal Reserve’s likely rate hike trajectory through the end of the year.
Monday will see services PMI data for May released at 9:45AM ET (1345GMT), while ISM non-manufacturing data for May and factory orders for April are both scheduled for 10:00AM ET (1400GMT).
Data on Friday showed that U.S. job growth slowed in May and employment gains in the prior two months were not as strong as previously reported, suggesting the labor market was losing momentum despite the unemployment rate falling to a 16-year low.