European stocks fall, oil spikes on Saudi tensions

LONDON: Europe's stock markets retreated on Tuesday (Nov 7) on worries over simmering Middle East tensions, which are centred on Saudi Arabia and have catapulted oil prices to two-year peaks.

Logo of the London Stock Exchange

Wall Street opened higher, building on closing records on Monday, but with little economic news scheduled to provide any firm direction, it turned lower in morning trading.

Crude jumped higher this week on Saudi Arabia's sweeping crackdown on princes and ministers, with billionaire tycoon Al-Waleed bin Talal arrested on corruption allegations.

Oil was boosted further as geopolitical tensions surged between Riyadh and Tehran, sparking fears of a conflict that could disrupt supplies from two major producers.

Brent oil struck US$64.65 per barrel - the highest since June 2015. New York crude on Monday hit US$58.44, also high since mid-2015. Prices later pulled back as profit-taking took hold.

"Crude oil is back in the news today, with discussions over a potential production freeze being set against increased tensions in the Middle East," said market analyst Joshua Mahony at online trading firm IG.

"A wide-ranging corruption crackdown in Saudi Arabia, coupled with increased conflict with Iran, has added to the instability in the world's biggest crude producer," he added.

Rising oil prices tend to support the energy sector and in turn boost world stock markets.

However, the lingering geopolitical uncertainty has cast a pall over Europe's equity markets, dealers said.

Mahoney said "European markets are seeing widespread selling towards the end of the day," with the FTSE 100 also dropping despite a drop in the pound.

ASIA FORGES HIGHER

On the upside, Asian markets climbed on Tuesday, with Tokyo and Sydney breaking through historic ceilings thanks to strong corporate earnings and a positive global growth outlook.

Japan's Nikkei closed at its highest level since January 1992, and Sydney's S&P/ASX 200 broke above the psychologically important 6,000 points barrier for the first time since the global financial crisis.

The upward trend tracked overnight records on Wall Street, where US stocks hit fresh highs for the second straight day amid a tech-sector mega-merger, buoyant oil prices, solid economic data and a series of strong earnings reports.

Asia investors appear to have shrugged off nervousness over tensions on the Korean peninsula, with US President Donald Trump visiting Seoul.

Trump arrived Tuesday for a two-day visit to South Korea, which he had previously accused of appeasing the North.

There had been fears that Trump's rhetoric or mere presence close to North Korea would raise tensions with Pyongyang or trigger further weapons tests by the nuclear-armed regime.

But so far there have been no significant developments to upset the markets.

A more alarming development for traders in Seoul - where shares slipped 0.2 per cent - was the possible renegotiation of the US-Korea Free Trade Agreement.

TOKYO RALLY

Japan's rally has been aided by a strong earnings season, with Toyota on Tuesday the latest major corporate to raise its profit forecast for the year.

Japan's number one car manufacturer said its net profit rose 13.2 per cent to 1.07 trillion yen (US$9.4 billion) for the six months to September, citing a cheaper yen and cost-cutting efforts.

In recent months, crude oil has been on an upward trajectory due to growing global demand as OPEC leads efforts to limit supply.

Key figures around 1630 GMT:

New York - DOW: DOWN 0.04 per cent at 23,539.31 points
London - FTSE 100: DOWN 0.7 per cent at 7,513.11 (close)
Frankfurt - DAX 30: DOWN 0.7 per cent at 13,379.27 (close)
Paris - CAC 40: DOWN 0.5 per cent at 5,480.64 (close)
EURO STOXX 50: DOWN 0.6 per cent at 3,661.73

Tokyo - Nikkei 225: UP 1.7 per cent at 22,937.60 (close)
Hong Kong - Hang Seng: UP 1.4 per cent at 28,994.34 (close)
Shanghai - Composite: UP 0.8 per cent at 3,413.57 (close)

Euro/dollar: UP at US$1.1566 from US$1.1554
Pound/dollar: DOWN at US$1.3135 from US$1.3142
Dollar/yen: DOWN at 114.09 from 114.26 yen

Oil - Brent North Sea: DOWN 56 cents at US$63.71 per barrel
Oil - West Texas Intermediate: DOWN 17 cents at US$57.18

Source AFP