LONDON (Reuters) - Europe's
top share index slipped to a three-week low on Wednesday
as concerns that violence in Iraq could escalate further
prompted investors to take refuge in safer assets such
as German bonds.
The FTSEurofirst 300 index of top European shares fell 0.7 percent
to its lowest since early June, while Germany's DAX share index
dropped 0.5 percent by 1015 GMT (6.15 a.m. ET). The MSCI world
equity index, which tracks shares in 45 countries, fell 0.3 percent
to a one-week low.
"Iraq tensions have overshadowed relatively good economic data this
week," said Lorne Baring, managing director of B Capital Wealth
Management in Geneva.
"Investors are still concerned about American foreign policy and
what will be the next step in terms of any military intervention as
opposed to diplomacy in the Middle East region."
Militants attacked one of Iraq's largest air bases as the first U.S.
teams arrived to assess the Iraqi security forces and decide how to
help counter a mounting Sunni insurgency. Advances by militants have
threatened to rupture the country two-and-a-half years after the
withdrawal of U.S. troops.
The weakness in European stocks followed a sell-off in overseas
markets. MSCI's broadest index of Asia-Pacific shares outside Japan
fell 0.4 percent, while Japan's Nikkei ended 0.7 percent lower. In
volatile U.S. trading, the S&P 500 closed 0.6 percent weaker after
hitting a fourth record high following upbeat U.S. data.
Risk-averse investors turned their attention to relatively safer
assets. Yields of German government bonds, perceived as safe havens,
fell toward their lowest this year. German 10-year yields were 3
basis point lower at 1.29 pct
"It's a volatile situation in Iraq and Treasuries and Bunds benefit
from flight to quality," said Nick Stamenkovic, bond strategist at
RIA Capital Markets in Edinburgh.
Oil markets were mixed as traders weighed the likelihood of supply
disruptions from Iraq. Analysts said lingering worries that
continued violence in Iraq would dent supplies from OPEC's
second-largest producer kept a floor under prices.
U.S. crude for August delivery advanced 0.6 percent, while Brent
crude for August fell 0.5 percent.
"Oil prices have been unusually stable in recent years, but events
in Iraq are causing a reassessment of medium-term oil market
fundamentals that we expect to translate into a phase of higher
long-term prices and more volatile trading conditions," strategists
at Barclays said in a note to clients.
In the currency market, the dollar slipped against the yen, with
some investors cautious ahead of the final reading of first-quarter
U.S. GDP. It is forecast to be revised down and is likely to boost
expectations that the Federal Reserve is in no hurry to tighten
policy. The dollar was down 0.1 percent versus the yen at 101.90.
(Additional reporting by Blaise Robinson in Paris, Marius Zaharia
and Anirban Nag in London and Lisa Twaronite in Tokyo; Editing by
Catherine Evans)
