By Josie Cox
Escalating tensions in Iraq remained the key focus of European
markets Friday, luring investors to assets perceived to be safe--an
urge that helped gold to its biggest daily gain in nine months in
the previous session.
On Thursday, U.S. President Barack Obama ordered up to 300
members of U.S. special-operations forces to Iraq, while ruling out
immediate airstrikes against Sunni extremists and stepping up the
pressure on Baghdad to form a government that bridges the country's
ethnic and religious divisions.
Gold was trading at $1,308.00 an ounce on Friday, marking a
price increase of around 5% since the start of June. Brent crude
was at $114.92 a barrel up more than 5.5% over the same period.
"The stakes are high for the oil market," Barclays analysts
wrote in a note. "Supply is currently constrained, with Libyan
production set to be offline for a while and Iran's
sanctions-restricted barrels likely to be slow to return to the
market."
Citigroup strategists, meanwhile, said that the longer the Iraq
insurgency lasts and the more divisive it becomes, the more
difficult it will be for Iraq to even approach its potential to
sustain production at six million barrels a day or more.
This, they said, would have "radical implications for oil
markets at a time of growing lost production world-wide due to
intensifying disorder in more petroleum-producing countries."
If the rally continues, it could also start to have implications
for currency markets, said Colin McLean, the chief executive of
Edinburgh-based investor SVM Asset Management. "Countries that are
particularly dependent on energy imports are particularly
vulnerable," he said.
Meanwhile, Russia started massing troops near its border with
Ukraine again, the North Atlantic Treaty Organization said.
After opening the session slightly weaker, equity markets
tentatively extended Thursday's gains, still encouraged by
reassurance from the U.S. Federal Reserve that it isn't about to
raise interest rates.
Fed Chairwoman Janet Yellen reiterated Wednesday that interest
rates would stay low for a relatively long time, even though she
also provided an upbeat assessment of the outlook for the world's
largest economy.
By midmorning, the Stoxx Europe 600 was up 0.1% on the day,
while the U.K.'s FTSE 100 added 0.2%. France's CAC-40 and Germany's
Dax both added 0.1%.
In the U.S., futures indicted the S&P 500 would open
unchanged, with investors consolidating their gains after the index
clocked a second straight record close on Thursday. Changes in
futures, however, aren't necessarily reflected in market moves
after the opening bell.
Notable gainers in Europe included Shire, which rose more than
13% after the U.K. drug maker rebuffed an offer from U.S. rival
AbbVie Inc. AbbVie said Friday that Shire had rejected three cash
and share proposals made to the board, with the latest valued at
GBP46.26 ($78.83) for each Shire share, for a total value of $46.35
billion.
Currency markets were largely quiet too.
Having lost ground over the past two sessions, the dollar was
broadly flat against the euro Friday, at $1.3612, after the euro on
Thursday hit a 10-day high against the greenback.
Sterling remained a whisker above $1.70. It has held firm since
Bank of England Governor Mark Carney last week said that a rise in
interest rates may come sooner than markets have been expecting. On
Wednesday, minutes from the latest policy-setting meeting showed
that some members of the Monetary Policy Committee were "surprised"
by the low probability investors attached to a shift in interest
rates this year.
Write to Josie Cox at josie.cox@wsj.com