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(Sharecast News) - European stock markets were a sea of red on Wednesday, as oil prices surged to their highest levels since July amid mounting geopolitical conflict in the Middle East, raising bets that central banks worldwide will soon have to act to fight inflationary pressures.
The pan-European Stoxx 600 finished the session down 1.5% at 639.98, its lowest finish since 23 July, with big losses registered in London (-1.3%), Madrid (-1.5%), Frankfurt (-1.7%), Zurich (-1.8%) and Paris (-1.9%).
Brent crude jumped 3.5% to $101.32 a barrel on Wednesday, its highest level since 24 July, as markets reacted to the latest developments in the Middle East, including US military strikes on five Iranian oil tankers and Iran firing ballistic missiles into Jordan.
Bond yields were firmly higher across Europe in response to oil's continued climb, with rates in Germany, Italy, Spain and the UK up around 8-10 basis points on the day.
"The difference between a $99.99 and $100 per barrel oil price may not mean much in practical terms but it is ringing major alarm bells for investors," said AJ Bell head of financial analysis Danni Hewson.
"Brent crude prices ticking over this mark for the first time since July is concentrating minds on mounting inflationary risks and the implications for borrowing costs."
In equity news, shares in Inditex fell in Madrid after the fashion conglomerate underwhelmed with its first-half results, with profits falling short of analysts' expectations and overshadowing a strong reported start to the third quarter.
In London, Burberry slumped as HSBC downgraded its stance on the luxury fashion brand to 'hold' from 'buy' and slashed the price target, saying there was not much scope for upwards sales and earnings revisions amid the company's turnaround.
Oil stocks across the continent were limiting losses for their respective equity indices, with Eni, BP and TotalEnergies all outperforming.
Finnish energy company Fortum was a high riser on the Stoxx 600 after Google announced a 13bn investment programme in Finland, which includes a 22-year power purchase agreement with Fortum for the Loviisa nuclear power plant, near to Google's Hamina data centre.