Morning Bid: Oil shock – Reuters.com

Workers are seen near pumpjacks at a China National Petroleum Corp (CNPC) oil field in Bayingol, Xinjiang Uighur Autonomous Region, China August 7, 2019. REUTERS/Stringer/Files

A look at the day ahead in markets from Dhara Ranasinghe.

Oil’s relentless climb, hitting almost $140 on Monday, means another turbulent start to the week for world markets.

The United States and European allies are exploring banning imports of Russian oil, U.S. Secretary of State Antony Blinken said on Sunday. read more

That sent Brent crude oil to its highest since 2008. Up some 30% since Russia invaded Ukraine on Feb. 24, the surge deals another shock to global price pressures already at their highest levels in decades.

European stock futures have dived more than 2% , U.S. equivalents are deep in the red, while in Asia, Japan’s blue-chip Nikkei sank to a 15-month low and was last down around 3% (.N225).

The euro too is reeling by the fresh surge in oil prices. It hit a new 22-month low against the dollar and briefly fell below parity to the Swiss franc for the first time since January 2015 — when Switzerland abandoned its currency peg against the euro.

The single currency appears increasingly correlated with the oil prices — the higher oil climbs, the lower the euro descends — as higher inflation and the blow to the economy higher energy prices threaten to squeeze consumption.

According to a note from Goldman Sachs, a sustained $20 oil rise shock will lower real economic growth in the euro area by 0.6% and by 0.3% in the United States.

European Central Bank policy makers meeting later this week have reason to be worried. So do other major central banks, and investors will be looking for any signs of a shift from policymakers speaking in the days ahead.

Key developments that should provide more direction to markets on Monday:

– Russia to open humanitarian corridors to Ukrainian cities read more

-Gold above $2,000 on safe-haven appeal; nickel up over 20% read more

– Jon Cunliffe, deputy governor of Bank of England, in hearing in parliament

– China’s export growth slows, Ukraine crisis poses risk read more

– UK house prices rocket at fastest rate since 2007: Halifax read more

– German industrial orders rise in January on robust foreign demand

– Euro zone sentix index

Reporting by Dhara Ranasinghe; editing by Sujata Rao

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