European Stocks Fall, Oil Prices Surge Amid Iraq Violence

LONDON (The Deal) -- European stocks declined on Friday, ignoring the positive impetus from major Asian markets, as oil prices surged amid escalating violence in Iraq which threatened to disrupt production and erupt into another full-scale war.

Sunni fighters calling themselves Islamic State of Iraq in the Levant, an Al-Qaeda splinter group, advanced both in the north of the country, near the Kurdish-dominated oil producing region, and toward Baghdad in central Iraq. Amid pressure from Republicans in Congress, President Obama said he's looking at all options to help Iraq's Shia government and didn't rule out air strikes.

In London, the FTSE was down 0.45% at 6,812.56. In Frankfurt, the DAX slipped 0.49% to 9,889.90 and in Paris, the CAC 40 fell 0.35% to 4,538.46. Brent crude oil for July settlement was up 0.54% at $113.63 per barrel by mid-morning in London, having risen to nine-month highs on Thursday.

Power producers including BG Group, BP (BP) and Royal Dutch Shell (RDS.A) in the U.K., Total (TOT) in France, Statoil (STO) in Norway and Repsol and Iberdrola in Spain all edged higher.

But the prospect of a sustained period of higher fuel prices weighed heavily on airlines, with International Consolidated Airlines Group and Easyjet Group in London, Deutsche Lufthansa in Germany, and Air France in Paris all down sharply.

In the U.K., homebuilders including Barratt Developments, Taylor Wimpey and Crest Nicholson Holdings plunged after Chancellor of the Exchequer George Osborne promised the Bank of England new powers to curb risky mortgages and therefore calm the housing market.

In a speech last night at the same annual event --- the so-called Mansion House gathering in the City of London -- Bank of England Gov. Mark Carney also hinted that the central bank may lift rates from the 0.5% level where they have been for more than five years later this year rather than next year, as previously expected.

Also in London, shares in online gaming companies Bwin.Party Digital Entertainment and 888 Holdings tumbled as Peel Hunt LLP analysts cut their recommendation to hold from buy, noting that Canada's Amaya Gaming purchase of the privately held Isle of Man company behind PokerStars will be negative for the two rivals.

Asian stock markets had a mixed day of trading on Friday. But Japanese and Chinese indices all closed higher, with Chinese markets buoyed by healthy economic data on industrial output and retail sales.

In Tokyo, the Nikkei closed up 0.83% at 15,097.84. In Hong Kong, the Hang Seng closed up 0.62% at 23,319.97.

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