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 rose 0.4% to hit $1,318.80 an ounce in late European trade,
marking a price increase of almost 6% since the start of June.
Brent crude was little changed at $114.90 a barrel but is also 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.
Moves in equity markets were largely subdued Friday, with
investors consolidating Thursday's gains following 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.
The Stoxx Europe 600 ended the session flat, while the U.K.'s
FTSE 100 added 0.3%. Germany's DAX closed 0.2% lower.
In the U.S., by contrast, the Dow Jones Industrial Average was
on track for a sixth straight gain in late European trade. The
S&P 500 added 0.3%. Thursday marked the 44th straight day the
S&P 500 closed up or down less than 1%, the longest stretch
since 1995.
Notable gainers in Europe included Shire, which rose more than
16% 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 ended the week largely quiet too.
Having lost ground over the previous two sessions, the dollar
was broadly flat against the euro Friday, at $1.3584. On Thursday,
the euro 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