Global equity markets were open to profit-taking following strong recent gains. On Wall Street, after fresh highs on Thursday the Dow Jones index started sluggishly. The index was down 0.7% more than two hours into the session after an industry survey showed the US manufacturing sector contracted for the fifth straight month in December.
In London, the FTSE 100 closed up 0.2% to 7,622.40 points; Frankfurt — DAX 30 ended down 1.3% to 13,219.14 points and Paris — CAC 40 ended flat at 6,044.16 points yesterday.
European shares slipped from near record highs. The pan-European STOXX 600 index was down 0.3%, with German shares having their worst day in a month as Lufthansa slumped 6.5%.
Along with losses in airlines Air France and EasyJet Europe’s travel and leisure sector shed 1.6%, on fuel price concerns as oil jumped more than 3%.
The jump in oil prices lifted the regional energy sector index to seven week highs which tied in with a weaker pound to help London’s FTSE buck the trend.
“Even if we hear nothing over the weekend the events have shown that this is a complex geopolitical situation and the ongoing uncertainty will have to be dealt with for a while,” said Ingo Schachel, head of equity research at Commerzbank.
Global financial markets had started the new decade on a high note on improving US-China trade relations, further monetary easing in China and a brightening economic outlook.
But data yesterday showed unemployment in Germany rose more than expected in December, while US manufacturing for the same period saw a bigger-than-expected dip.
Yesterday’s moves tipped an otherwise flat week for Europe into red.
World oil prices jumped yesterday after the US killed a top Iranian general, fanning fresh fears of conflict in the Middle East, with Tehran warning of “severe” retaliation.
The head of Iran’s Quds Force, Qasem Soleimani, was killed in an attack on Baghdad’s international airport early yesterday.
Later, US President Donald Trump tweeted a picture of the American flag and the Pentagon said he had ordered Soleimani’s assassination.
Brent oil surged 4.5% in the London morning and WTI jumped 4.1% as traders fretted over the dramatic escalation in tensions, although prices dropped back before the European close.
Major oil firms saw their shares gain ground, BP adding 2.75% to 494.05 pence while Royal Dutch Shell B shares rose 2.13% to 2,306.50 pence.
Iran’s supreme leader Ayatollah Ali Khamenei warned Tehran would seek “severe revenge” for “the criminals who bloodied their foul hands with his blood”, while the country’s foreign minister called the move a “dangerous escalation”. Cailin Birch, global economist at The Economist Intelligence Unit, said the market feared a “broader conflict”.
Prices saw record gains in September after attacks on two Saudi Arabian facilities briefly slashed output in the world’s top oil exporter by half.
Birch, however, talked down the prospect of a full-blown war and described yesterday’s price gains as “fairly muted” so far.
“We do not expect to see a one-day price spike, in percentage terms, as large as the 10% jump seen in September 2019 when Saudi oil infrastructure was attacked.
“While this strike is the most significant escalation of US-Iran tensions that we’ve seen yet, we still do not expect the US and Iran to enter into a full-fledged war that would impact oil production and disrupt regional supply chains.”
Meanwhile, investors piled into safe-havens, including government bonds, the Japanese yen and gold, which reached a near four-month peak.
from Gulf Times https://ift.tt/2QpgAuR
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