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Saudi Arabia, Canada Offer Shocks to Global Oil Market

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Saudi Arabia overhauls its government, the Brexit battle heats up, and Greece is back for another season. Here are some of the things people in markets are talking about today.

Saudi government overhaul

Saudi Arabia’s King Salman issued more than 50 royal decrees on Saturday in a government shake up that sees the oil minister and central bank head replaced. The changes, the latest step in the Saudi Vision 2030 plan for a post-oil state, also include a range of measures to encourage foreign investment in financial markets in the country. Oil producers across the Middle East are seeking to implement reforms for the longer run but perhaps more significantly for investors, in the short term they are turning to the bond market to fill financial holes created by persistently low oil prices. 

Brexit battle heats up

The debate on Britain's membership of the European Union is set to kick up a gear this week with speeches due from the Chancellor of the Exchequer, the governor of the Bank of England and the head of the International Monetary Fund. With about 20 percent of voters still undecided ahead of the June 23 referendum, there is still much to play for. U.K. Prime Minister David Cameron, in a speech this morning, evoked the memory of wartime leader Winston Churchill in a patriotic appeal to Britons not to vote to leave the EU. The pound - which has been the developed world's worst-performing currency this year - is holding its four-day decline against the dollar this morning, trading at $1.4450 at 5:50 a.m. ET.

Greece is back

The seemingly never-ending Greek austerity talks are back in the spotlight today following last night's successful vote in the country's parliament to implement pension and tax reforms. The euro area and the IMF will meet today to discuss whether the measures are enough to allow another disbursement of emergency funds, with the IMF demanding more fiscal “contingency measures” worth about 3.5 billion euros ($4 billion) in case Greece strays off budgetary course. The debate will also focus on the possibility of debt relief for the euro area member. 

Markets higher, China slumps

Equity markets across the world, with the major exception of China, are generally higher this morning. The MSCI Asia Pacific Index dropped 0.2 percent to 126.94 with the Shanghai Composite Index doing most of the damage, closing 2.8 percent lower as trade data released over the weekend disappointed. In Europe, the Stoxx 600 Index was 1.38 percent higher at 5:47 a.m. ET following German factory orders data that showed a pick up in that economy. S&P 500 futures were 0.4 percent higher.

Commodities

Iron ore prices are getting clobbered once again. The SGX AsiaClear contract for June settlement in Singapore plunged 9.1 percent. Meanwhile, spot ore prices in Qingdao just had their worst week since 2011, and are off over 17 percent from their recent highs. West Texas Intermediate crude is up close to 2 percent as of 6:16 a.m. ET, amid ongoing wildfires in Canada that have knocked approximately 1 million barrels of production offline. In other commodity news, hedge funds are the most bullish that they've been on gold since 2011. 

What we've been reading 

This is what's caught our eye over the weekend.

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