Middle East Tensions Push European Shares Lower
European equities slid Wednesday, with persistent geopolitical tensions offsetting the impact of upbeat U.S. consumer confidence data.
At least 50 people were killed and more than 132 others wounded in western Iraq Tuesday, according to local officials.
In Ukraine, a day-old cease-fire was on the verge of collapse after pro-Russia rebels shot down a military helicopter.
A Barclays survey published Tuesday showed that the majority of investors' top concern for markets is now geopolitical unrest. "By contrast, in the last two surveys, investors thought China and emerging-market growth and Federal [Reserve] policy withdrawal were the main risks," economists wrote in a note.
The Stoxx Europe 600 was 0.5% lower midmorning with the U.K.'s FTSE 100 down 0.6%. Germany's DAX lost 0.3% and France's CAC shed 0.6%.
A decline in U.S. stocks on Tuesday also weighed on Europe's markets. Futures pointed to a steady open for Wall Street on Wednesday. Changes in futures aren't necessarily reflected in market moves after the opening bell.
Stocks in Dubai recovered from a slide on Tuesday, climbing 2.65% after Arabtec Holding quashed speculation that it might delist following a prolonged fall in its share price.
Brent crude oil prices dipped, but remained at a historically high level of close to $114 a barrel.
"Oil prices have been unusually stable in recent years, but events in Iraq are causing a reassessment of medium-term oil market fundamentals. We expect this to translate into a phase of higher long-term prices, and more volatile trading conditions," Barclays economists wrote in a note.
Figures out of the U.S. Tuesday showed that consumers' confidence reached its highest level since January 2008 in June, beating forecasts by economists surveyed by The Wall Street Journal. Investors Wednesday, however, will be eyeing the third release of first-quarter U.S. gross domestic product figures, which is expected to paint a less upbeat picture.
Growth was initially reported to have increased by 0.1% and later revised to show a contraction of 1.0%.
"Today's GDP revisions are likely to show an even deeper contraction in the first quarter," Deutsche Bank's U.S. Chief Economist Joseph LaVorgna said. He added that it isn't uncommon to see weak quarterly GDP figures followed by a significant rebound.
"As such, forecasters should not be overly concerned by the first-quarter contraction, because the economy has shown compelling signs of rebounding in the current quarter--and based on historical performance, the snapback can be substantial," Mr. LaVorgna said.
In currency markets, sterling continued to nurse losses after Bank of England governor Mark Carney Tuesday raised new concerns about low wage growth in the U.K. and the impact this may have on the central bank's plans to raise interest rates.
The pound dipped 0.1% to be at $1.6974. Currency strategists at BNP Paribas, however, remain upbeat in the long term about the British currency.
"In relative terms sterling continues to offer among the most attractive rate outlooks in the G-10," they wrote in a note. "The pound's relative resilience to Carney's comments despite large bullish pound positioning, suggests longs remain committed to the positive macro view," they said.
"The first BOE rate hike still appears likely by the end of this year or by early in 2015," said currency strategist Lee Hardman at Bank of Tokyo Mitsubishi UFJ.