Europe close: Stocks mixed as investors watch oil markets

(Sharecast News) - European shares closed mixed on Monday as US forces carried out a ninth consecutive day of strikes against Iranian targets, lifting oil prices and increasing concerns about inflation and interest rates.

The Stoxx 600 fell 0.23% to 640.05 and London's FTSE 100 lost 0.71% to 10,524.76, while Germany's DAX rose 0.12% to 24,861.67 and France's CAC 40 edged up 0.02% to 8,340.11.

"Sterling is down at a decent clip and gilt yields have risen since [Andy] Burnham took over [as UK prime minister]," said Saxo UK investor strategist Neil Wilson.

"10-year gilt yields up about eight basis points on the day, about twice the move higher in the 10-year Treasury, with two-year yields up a similar amount.

"GBP-USD is backing off a high at 1.3480 this morning to below 1.3420 where it's now close to reversing the big jump higher on 15 July."

US president Donald Trump said the latest attacks were retaliation for the deaths of three American military personnel.

Iran's Revolutionary Guard said it responded by striking US military targets in Kuwait and targeting aircraft at Jordan's Aqaba airport with ballistic missiles, while sirens were heard in Bahrain.

Brent crude, which earlier reached its highest level since June, was last up 0.01% on ICE at $88.11 a barrel, while West Texas Intermediate futures slipped 0.32% on NYMEX to $82.23.

"The tone for the week has already been set as the US and Iran continue to trade strikes," noted IG chief market analyst Chris Beauchamp.

"And now a second waterway closure looms to cause further problems for global markets.

"While some hints of a return to negotiations helped to continue Friday's late rally, this has begun to stumble as news of fresh attacks filters through.

"The next two weeks will be a tussle between conflict news and big-name earnings, and the tug of war between these two is likely to keep volatility elevated."

The inflationary impact of higher oil prices will be closely watched when the European Central Bank meets on Thursday, with policymakers expected to hold rates at 2.25% following last month's pre-emptive increase.

Analysts now expect another rise in September and rates to reach 2.75% early next year.

Sentiment was also weakened by declines in Asian markets as investors continued to unwind technology positions amid concerns that enthusiasm surrounding artificial intelligence-linked stocks may have run ahead of fundamentals.

Euro area construction output rises in May

In economic news, eurozone construction output rose 0.4% in May after a 0.1% increase in April, while production across the wider EU grew 0.3%.

Output increased 1.2% year on year in the eurozone and 1.8% in the EU.

UK consumer confidence meanwhile improved to a four-month high in July, with the S&P Global sentiment index rising to 43.4 from 42.2 in June, although all measures remained below the neutral 50.0 level.

Meanwhile, China kept its one-year and five-year loan prime rates unchanged at 3.0% and 3.5%, respectively, for a 14th consecutive month despite second-quarter GDP growth slowing to 4.3%.

Oil plays rise, Ryanair in the red

On the equities front, oil majors advanced alongside crude prices, while Ryanair Holdings fell 4.55% after the low-cost carrier's results missed forecasts as the Iran war disrupted operations and increased costs.

Reporting by Josh White for Sharecast.com.