European shares on Friday slipped from near record highs after a US airstrike in Iraq that killed a top Iranian commander increased Middle East tensions and spurred moves out of risk assets, while an oil price surge hammered airline stocks.
Iranian Supreme Leader Ayatollah Ali Khamenei vowed harsh revenge after major general Qassem Soleimani, commander of the Islamic Revolutionary Guard Corps’ Quds Force and architect of the country’s spreading military influence in the Middle East, was killed in the airstrike in Baghdad.
Leaders from many other countries urged restraint.
However, City Index Group market analyst Ken Odeluga said: “As such, chances that a further escalation of tensions with Washington can be avoided, appear to be low.”
The pan-European STOXX 600 on Friday fell 1.80 points, or 0.4 percent, to 417.92, dropping 0.4 percent from a close of 419.74 on Dec. 27, with German shares having their worst day in a month as Deutsche Lufthansa AG slumped 6.5 percent.
Along with losses by Societe Air France SA and EasyJet Europe Airline GmbH, the travel and leisure sector shed 1.6 percent on fuel price concerns as oil jumped more than 3 percent.
The jump in oil prices lifted the regional energy sector index to a seven-week high, which tied in with a weaker pound to help London’s bourse buck the trend.
The FTSE 100 on Friday rose 18.10 points, or 0.2 percent, to 7,622.40, but slid 0.3 percent from 7,644.90 a week earlier.
“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,” Commerzbank AG head of equity research Ingo Schachel said.
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.
However, data released on Friday showed that unemployment in Germany rose more than expected last month, while US manufacturing for the same period saw a bigger-than-expected dip.
Friday’s moves tipped an otherwise flat week for European equities into the red.
In corporate news, tobacco companies Swedish Match AB and British American Tobacco PLC rose to the top of the STOXX 600 after the US Food and Drug Administration exempted menthol and tobacco from a list of popular e-cigarette flavors that it had banned under new guidelines.
Cellnex Telecom SA rose 2.3 percent after agreeing to buy Portuguese telecommunications tower operator OMTEL for about 800 million euros (US$892.8 million).
Trading for the first time this year, Swiss stocks rose 0.8 percent after a nearly 26 percent rise last year as investors bought into consumer goods.
Additional reporting by staff writer
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