European stock markets advance as rate tensions ease

Logo of the London Stock Exchange

European equity markets benefited from an apparent fading of tensions between Italy and the EU over Rome's spending, and there were also glimmers of hope that Brexit talks could see some progress.

"European equities are mostly higher in afternoon action, with earnings season ramping up in the US and results mostly better than forecasted, while Italian budget and UK Brexit concerns appear to be easing," analysts at the Charles Schwab brokerage said in a note.

'NOT PARTICULARLY COMFORTABLE'

London stocks, however, underperformed their eurozone peers as a weak oil price dragged down shares in energy majors.

Stock markets have been rocked in recent days by fears over spiking oil prices, rising US long-term interest rates and an attack by President Donald Trump on the US central bank and its policies.

While none of the dangers have disappeared, investors were grateful for the reprieve from ongoing tension.

"Investors may not be feeling particularly comfortable yet but we are seeing some welcome stability in the markets," said Craig Erlam, an analyst at Oanda.

Tensions over Saudi Arabia have meanwhile eased, helping to calm the oil market.

Trump on Monday suggested that "rogue killers" could be to blame for the disappearance of Saudi journalist Jamal Khashoggi - an apparent row back from earlier threats of "severe punishment" against the kingdom's government if it turned out he was murdered.

'REASONABLE SAUDIS'

Analysts said while some oil market tension was to be expected during the standoff, there was very little chance of Saudi Arabia and the US taking drastic action over the Khashoggi case.

"I just can't see how the US, for example, would punish one of its most important allies in the Middle East, not to mention the fact Saudi Arabia is one of the largest buyers of US weapons," said Fawad Razaqzada, at Forex.com.

And Saudi Arabia, in turn, should be expected to weaponise its main export, oil, only if cornered by Trump.

"Obviously, Saudi Arabia has the ability to use oil to put pressure on the rest of the world," said Caroline Bain, chief commodities economist at research consultancy Capital Economics.

"But historically it has always tried to avoid mixing economics and politics - and has consequently gained a reputation for reasonable behaviour where oil is concerned," she told AFP.

Key figures around 1540 GMT:

London - FTSE 100: UP 0.4 per cent at 7,059.40 points (close)

Frankfurt - DAX 30: UP 1.4 per cent at 11,776.55 (close)

Paris - CAC 40: UP 1.5 per cent at 5,173.05 (close)

EURO STOXX 50: UP 1.5 per cent at 3,257.34

New York - Dow Jones: UP 1.4 per cent at 25,613.24

Tokyo - Nikkei 225: UP 1.3 per cent at 22,549.24 (close)

Hong Kong - Hang Seng: DOWN 0.1 per cent at 25,432.67 (close)

Shanghai - Composite: DOWN 0.8 per cent at 2,546.33 (close)

Euro/dollar: UP at US$1.1585 from US$1.1569 at 0630 GMT

Pound/dollar: UP at US$1.3212 from US$1.3147 at 0630 GMT

Dollar/yen: UP at 112.17 from 112.06 yen at 0630 GMT

Oil - Brent Crude: UP three cents at US$80.81 per barrel

Oil - West Texas Intermediate: DOWN four cents at US$71.74 per barrel