In case you haven’t been paying attention to the news this weekend, half of Saudi Arabia’s oil production has been disrupted. In what was one of the largest attacks on oil infrastructure in history, drones hit Saudi’s largest oil production facility. Approximately 5.7 million barrels per day were knocked off line and it was the single largest sudden disruption to the global oil supply ever.
The attack has sent shock waves through the markets. In pre-market, the price of oil jumped almost 20% before the U.S. announced it was tapping its strategic reserves. As of writing, it is now up approximately 10% as world leaders are on high alert. The successful attack is a sobering event as it also a wake-up call – crude infrastructure is “highly vulnerable to attack” according to analysts at City Financial.
Canadian stocks are expected to open in the red, and it remains to be seen what the fallout will entail. Are more attacks on the way? Will the U.S. retaliate? What impact will this have on the global economy? All factors to consider.
As the fourth quarter winds down, there are no big earnings expectations. Most all of the major players have already reported and of those expected to announce, most are micro caps. These are stocks with market caps below $100 million and in many cases have low volume.
Wednesday, September 18
One major news event expected out of Canada this week is Wednesday’s Core Consumer Price Index (CPI) report. This macro event is a means of measuring changes in purchasing trends and inflation. The CPI is closely watched and has a role in key Fed interest rate decisions.
The current forecast is for the August Core CPI to come in at 1.9%. A significantly lower than expected CPI may further the case for a rate cut. A Core CPI reading in line with expectations will give the central bank more time to digest incoming data and external macro events (see above).
Friday, September 20
July retail sales are expected to jump led by higher gasoline prices which were up approximately 3-4% during the month. After a negative reading in June, the expectation is for a 0.6% jump this time around.
For those invested in retail stocks such as Canada Goose (TSX:GOOS) and Aritzia (TSX:ATZ), pay close attention to the clothing and clothing accessories stores reading. Last month, sales jumped 4.2 percent month over month and 2.1% over June of 2018. These were among the highest in retail. Another strong reading can send these stocks higher.
Overall, this news in the oil and gas sector has the potential to send stocks into oversold territory.