* Brent rallies on fears of global supply disruption
* Stocks slip, safe-haven gold and Japanese yen rise
* Saudi bonds at multi-week lows, oil-related currencies
rise
* China industrial output growth weakens, hits risk appetite
* World FX rates in 2019: http://tmsnrt.rs/2egbfVh
(Adds details, updates prices)
By Danilo Masoni
MILAN, Sept 16 (Reuters) - Oil prices hit four-month highs
on Monday after attacks on crude facilities in Saudi Arabia
fuelled worries over the impact of an oil shock on economic
growth, halting a positive run in world stocks and bolstering
demand for safe-haven assets.
Brent crude futures LCOc1 rose nearly 20% at one point in
their biggest intra-day gain since the Gulf War in 1991, and
U.S. futures CLc1 jumped almost 16%, both hitting their
highest level since May. But prices came off their peaks after
U.S. President Donald Trump authorised the use of the country's
emergency stockpile to ensure stable supply. O/R
By 1126 GMT, Brent futures were up 10% at $66.33 per barrel,
while U.S. light crude was up 9.5% at $60.27.
The upheaval in the oil market and poor economic data from
China pushed gold prices, the Japanese yen and Swiss franc
higher and sent core euro zone bond yields lower, even though
the broader fallout on markets was not dramatic.
"While the attacks present yet another headwind for a global
economy that is already buffeted by deteriorating manufacturing
activity and elevated trade tensions, we don't believe that this
short-term disruption to oil production will trigger a global
recession," said Mark Haefele, CIO at UBS Global Wealth
Management.
"On the back of geopolitical and market uncertainties,
thematic gold exposure is still advised alongside
countercyclical positions such as Japanese yen longs," he added.
World stocks .MIWO00000PUS halted a four day winning
streak to trade slightly lower, down 0.15% on the day. European
shares .STOXX fell 0.4% and Wall Street signalled a weak
start, too, with futures for the S&P 500 ESc1 off 0.4%.
Monday's rapid spike in crude prices came at a time when
central banks in the United States, Europe and Asia are easing
monetary policy to fight a slowdown in the global economy amid a
drawn-out trade war between Washington and Beijing.
The U.S. Federal Reserve is due to hold its next policy
meeting on Wednesday, at which it is widely expected to ease
interest rates and signal its future policy path. FEDWATCH
Expectations of monetary policy stimulus have been helping
offset immediate concerns over the economy, supporting equity
prices. World stocks are trading just around 2% below the
all-time peak they hit in January 2018.
Data from China earlier on Monday underscored a slowdown in
the world's No. 2 economy, although that bolstered hopes of more
stimulus policies from Beijing to underpin the economy.
Industrial production in China grew at its weakest pace in
17-1/2 years, the data showed, amid rising U.S. trade pressure
and softening domestic demand. Citi strategist Dirk Willer said the impact of a sustained
rise in oil prices would be more pronounced for Europe and China
than for the United States, which is now a net crude exporter,
even though U.S. consumers would be hit.
"The U.S. may still be a relative winner. The size of the
shock obviously will depend on how much oil is taken off the
market," he said.
The weekend attack at Saudi Aramco's facilities shut down
about 5% of the world's supply and while the company had not
given a timeline for the resumption of full output, sources said
a return to normal volumes "may take months". SHINES, SAUDI BONDS HIT
Trump also said on Sunday the United States was "locked and
loaded" for a potential response to the attack on Saudi Arabia's
oil facilities, after a senior U.S. administration official said
Iran was to blame. That inflamed fears about Middle East tensions and worsening
relations between Teheran and Washington, powering safe-haven
assets, with gold XAU= up 1% to $1,504 per ounce. GOL/
Dollar-denominated bonds issued by Saudi Arabia's government
and state-oil firm Saudi Aramco tumbled to multi-week following
the attacks.
"Markets had become too sanguine over the last few months
about the geopolitical risks facing countries allied with the
U.S. against Iran, with Saudi Arabia particularly vulnerable,"
said Patrick Wacker at UOB Asset Management.
"While Saudi Arabia's sovereign fundamentals are still firm,
bond prices will need to factor in higher geopolitical risk
going forward," he added.
Appetite for safe haven assets pushed yen JPY= up 0.3% to
$107.7, while currencies of oil-exporting countries such as the
Norwegian crown NOK=D3 , the Canadian dollar CAD=D3 and the
Russian rouble RUB= were also in demand. The U.S. dollar .DXY was up 0.1% against a basket of
currencies.
Elsewhere in bond markets, core longer-dated euro zone bond
yields tumbled as the Saudi developments and the poor data from
China helping boosted demand for safe-haven assets. Brexit
uncertainty also weighed. Germany's 10-year benchmark DE10YT=RR was down at -0.479%
DE10YT=RR . Bund futures FGBLC1 rose 0.3%, while futures for
U.S. 10-year Treasury notes TYv1 rose 0.4%.
"While there are no doubt short-term inflationary
implications from an oil price shock, we would imagine that US
rates will fall, given rising growth fears," Citi's Willer said.
(Additional reporing by Swati Pandey in SYDNEY and Karin
Strohecker in LONDON; Editing by Toby Chopra)