By Carla Mozee, MarketWatch
LONDON (MarketWatch) -- European stocks fell Friday, as an
escalation of violence in Iraq sent energy prices soaring, while
investors assessed the prospect of a sooner-than-later
interest-rate increase in the U.K.
The Stoxx Europe 600 fell 0.2% to 347.07, though it pared an
intraday loss of 0.9%.
Oil producers were among the strongest advancers, with Statoil
ASA rising 2%, Eni SpA higher by 1.7%, Repsol SA up 1.1%, and Royal
Dutch Shell PLC tacking on 0.8%.
Crude-oil prices surged on concerns that unrest in Iraq could
lead to disruptions in the country's oil supplies. Islamist
militants had reportedly taken full control of the northern oil
city of Kirkuk and vowed to march to Baghdad. Iraq is the
second-largest oil producer in the Organization of the Petroleum
Exporting Countries. But on Friday, the International Energy Agency
said supplies in the country aren't at immediate risk.
U.S. President Barack Obama was expected to make a public
statement about the situation in Iraq shortly after the close of
European trading.
Crude-oil futures (CLN4) pushed toward $106 a barrel, and August
Brent traded above $112 a barrel. The U.S. crude benchmark on
Thursday settled at its highest level in nearly nine months.
As oil prices jumped, shares of air carriers EasyJet PLC and
Ryanair Holdings PLC fell 2.9% and 2.7%. Retail shares were also
pulled lower, with Britain's Kingfisher PLC losing 4% and Germany's
Metro AG down 0.7%.
The spike in oil prices comes at a time of sluggish economic
growth in Europe, which the European Central Bank plans to tackle
with recently launched measures aimed at encouraging lending by
banks and spending by consumers.
In Germany, the DAX 30 index fell 0.3% to 9,912.87, and France's
CAC 40 index declined 0.2% to 4,543.28.
Meanwhile, U.K. stocks were hit by the prospect of higher
interest rates. The U.K.'s FTSE 100 index dropped 1% after Bank of
England chief Mark Carney said an interest-rate increase may come
sooner than the markets anticipate. "Growth has been much stronger,
and unemployment has fallen much faster than either we or anyone
else expected," a year ago, Carney said late Thursday in a speech
at Mansion House in London.
Markets had been pricing in a rate hike around the second
quarter of 2015, but two-year swap rates have risen more than 15
basis points on Thursday's level, said Berenberg in a note
Friday.
"We expect the first hike in November 2014. The change in tone
was sensible, in our view. Record low interest rates are
increasingly unnecessary," wrote Rob Wood, chief U.K. economist at
Berenberg.
Also speaking at Mansion House, Britain's finance minister
George Osborne said Thursday he would give the central bank greater
power to curb mortgage lending, in a bid to reduce any risks from
the housing market to financial stability.
Shares of British residential property firm Persimmon PLC lost
6.9%, the sharpest decliners on the Stoxx 600, and Barratt
Developments PLC fell 6.3%, while Berkeley Group Holdings PLC ended
down 4.3%.
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