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EUROPE MARKETS: Europe Markets Climb As Oil Prices Rise On Tanker Incident

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06/13/2019 | 06:55am EDT

By Dave Morris

Europe markets were lifted by rising oil prices sparked by news of an incident involving two oil tankers near the Strait of Hormuz.

How did markets perform?

The Stoxx 600 was up 0.2% to 380.6 after sinking 0.3% Wednesday.

The U.K.'s FTSE 100 also edged up 0.2%, following Wednesday's 0.4% decline.

The pound ticked down 0.1% to $1.2674. It traded flat Wednesday.

In Germany, the DAX increased 0.5% to 12,172.9, erasing Wednesday's 0.3% slump.

France's CAC 40 rose 0.1% to 5,379.4. On Wednesday it dropped 0.6%.

Italy's FTSE MIB bounced 0.7% to 20,612.5, eliminating the 0.7% fall it saw Wednesday.

Oil rallied significantly on news of an incident in the Gulf of Oman. The West Texas intermediate (WTI) benchmark was up 2.8% to $52.59/bbl, while the Brent contract was 3.2% higher at $61.90/bbl.

What's moving the markets?

With little in the way of market-moving news, investors are again weighing the potential impact of the U.S.-China trade war on policy and markets.

In a whirlwind 10-day tour of Chinese officials and businesspeople, Bloomberg reporter Shawn Donnan came to the conclusion (https://www.bloomberg.com/news/articles/2019-06-12/tour-of-china-shows-a-nation-girding-for-protracted-trade-war) that the country is battening the hatches for a long trade war with the U.S. Such dispatches have battered the optimism of those who argue that a long dispute is unlikely, and policy makers around the world do not appear inclined to wait and see whether it gets resolved.

A Reuters poll (https://www.reuters.com/article/us-usa-economy-poll/trade-war-risks-forcing-fed-rate-cut-this-year-say-economists-reuters-poll-idUSKCN1TE017?il=0) of economists said the chances of an interest-rate cut by the U.S. Federal Reserve have risen sharply, citing trade tensions. Analysis in the FT (https://www.ft.com/content/0753f3f6-8ced-11e9-a1c1-51bf8f989972) suggested traders appear to be shrugging off potential stimulus by the European Central Bank, as neither the euro nor bond yields reacted as expected to last week's dovish talk at the ECB meeting. And China Daily reported (http://www.chinadaily.com.cn/a/201906/13/WS5d018647a310176577230d74.html)that economists expected a cut in the reserve requirement ratio (RRR), as well as possible interest rate cuts, to counter trade war related tension, citing private sector economists as well as an interview with People's Bank of China Governor Yi Gang.

London Capital Group senior market analyst Ipek Ozkardeskaya wrote: "Provided the unpromising headlines across the globe, investors believe that it may be wiser to move toward the safe haven assets," and pointed to strength in the Japanese Yen, the Swiss franc and gold.

In the U.K., Conservative MPs begin the first round of voting to choose a leader to replace outgoing Prime Minister Theresa May. A key aspect of the debate among the leading candidates is whether they would consider, as Dominic Raab has suggested, suspending Parliament to push through a no-deal Brexit. While front-runner Boris Johnson has publicly said he is "strongly not attracted" to such an outcome, The Times reported (https://www.thetimes.co.uk/edition/news/boris-johnson-won-t-rule-out-suspending-parliament-3v2mcjbcz) that Johnson had privately indicated he would leave the option open.

Which stocks are active?

Oil producers rallied (https://www.reuters.com/article/us-global-oil/oil-surges-after-report-of-tanker-incident-in-gulf-of-oman-near-iran-idUSKCN1TE05D?il=0) on news that two oil tankers were damaged near the Strait of Hormuz, according to the U.S. Navy, by what they called a "reported attack". The crews have been evacuated but no casualties have been reported. The incident follows the sabotage of four ships in May, which the U.S. suspected was the result of Iranian activity. Total shares rose 0.5%, while Royal Dutch Shell were up 0.3%.

The results of Germany's hotly contested 5G spectrum auction came in higher than expected at EUR6.6 billion raised (https://www.ft.com/content/c6a6a47c-8d44-11e9-a1c1-51bf8f989972). Successful bidders' shares traded higher Thursday. 1&1 Drillisch AG (DRI.XE) surged 8.1%. Telefónica Deutschland Holding AG (O2D.XE) climbed 4.1%. Vodafone Group was 1.4% higher. Deutsche Telekom AG edged up 0.5%.

Stocks mentioned in the article
ChangeLast1st jan.
1&1 DRILLISCH -2.08% 23.02 Delayed Quote.0.61%
BYD COMPANY LIMITED -1.47% 43.5 End-of-day quote.11.97%
CAC 40 0.97% 4741.61 Real-time Quote.-21.46%
DAX -1.65% 11586.85 Delayed Quote.-12.55%
DEUTSCHE TELEKOM AG -1.08% 14.175 Delayed Quote.-2.71%
EURO / SWISS FRANC (EUR/CHF) 0.07% 1.06845 Delayed Quote.-1.74%
EURO STOXX 50 0.54% 3066.11 Delayed Quote.-18.56%
RED ROCK RESORTS, INC. -2.89% 13.8 Delayed Quote.-42.38%
ROYAL DUTCH SHELL PLC 2.30% 14.508 Delayed Quote.-45.80%
STOXX EUROPE 600 0.67% 352.64 Delayed Quote.-15.75%
STOXX ITALY 45 (EUR) -0.73% 83.24 Delayed Quote.-22.20%
TELEFONICA DEUTSCHLAND HOLDING AG -2.74% 2.766 Delayed Quote.7.04%
TOTAL S.A. 1.71% 34.205 Real-time Quote.-31.66%
US DOLLAR / JAPANESE YEN (USD/JPY) 0.01% 107.66 Delayed Quote.-0.83%
VODAFONE GROUP PLC 0.74% 134 Delayed Quote.-9.36%
WORLD CO., LTD. -3.03% 1567 End-of-day quote.-41.77%
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