Markets

European stocks close lower amid geopolitical tensions; oil shares spike 3%

Key Points
  • The pan-European Stoxx 600 closed provisionally 0.4% lower; oil and gas stocks surged 3% as crude prices soared following the oil attack in Saudi Arabia.
  • President Donald Trump said the U.S. is "locked and loaded" and was waiting to hear from Saudi Arabia as to the next steps, sparking fears of imminent military confrontation.
  • Asian stocks were mixed Monday afternoon after data revealed Chinese industrial output for August grew at its slowest pace for 17.5 years.

European stocks closed lower Monday as investors digested an escalation of tensions in the Middle East following an attack on Saudi oil production.

The pan-European Stoxx 600 closed provisionally about 0.4% lower. Household goods fell over 1% to lead losses while oil and gas stocks surged 3% as crude prices soared following the oil attack in Saudi Arabia.

Oil prices surged overnight after drone attacks at the weekend hit major oil production facilities in Saudi Arabia, effectively wiping out 5% of global supply. Brent crude hit its highest intra-day percentage gain on record, last trading more than 10% higher at $66.52 a barrel.

President Donald Trump said the U.S. is "locked and loaded" and was waiting to hear from Saudi Arabia as to the next steps, sparking fears of imminent military confrontation. Trump also authorized the release of U.S. oil reserves to help maintain global supply.

Washington has placed the blame for the attacks squarely on Iran — a claim Tehran has disputed. The Saudi-led military coalition battling Yemen's Houthi movement said Monday that its initial findings showed the attacks were carried out with Iranian weapons and not launched from Yemen. U.S. Secretary of Energy Rick Perry told CNBC on Monday that a coalition of countries should be formed to "put a stop to Iran's malign activity."

Elsewhere, data revealed Chinese industrial output for August grew at its slowest pace for 17.5 years. Chinese Premier Li Kequiang said it is "very difficult" for China's economy to grow at a rate of 6% or more, due it its high starting base and a turbulent international backdrop.

On Wall Street, stocks slid as fears of a global economic slowdown grew amid the surge in oil prices. The Dow Jones Industrial Average fell over 100 points, while the S&P 500 and Nasdaq indexes were both in negative territory.

Back in Europe, U.K. Prime Minister Boris Johnson met with European Commission Jean-Claude Juncker in Luxembourg on Monday, who said he reminded Johnson that it was now up to the British government to offer a solution to the Brexit impasse.

Meanwhile in Italy, reports suggested that former Prime Minister Matteo Renzi is planning to break away from the ruling Democratic Party (PD) to set up a new centrist movement, complicating the new coalition between the PD and the anti-establishment Five Star Movement (M5S).

In corporate news, Axel Springer is planning layoffs as part of a cost-cutting effort after U.S. investment firm KKR became its largest shareholder, the German media group's chief executive said in an interview published Sunday by the Sueddeutsche Zeitung.

After the board of the London Stock Exchange (LSE) rejected a proposed $36.6 billion takeover offer from Hong Kong Exchanges and Clearing (HKEX), the Asian trading house has arranged meetings with LSE investors in a bid to curry favor, raising the prospect of a hostile takeover, according to Reuters. LSE shares fell over 2%.

Benetton holding company Edizione, which has a controlling 30.25% stake in Italian infrastructure giant Atlantia, expressed its dismay on Sunday following allegations of safety violations by Atlantia. Police on Friday revealed that evidence of falsified safety reports had been discovered as part of a probe of a deadly bridge collapse in Genoa last year.

Stocks on the move

Oil and gas stocks were the biggest climbers: Lundin Petroleum jumped nearly 9%, Tullow Oil was up over 8%, and Technipfmc added almost 5%.

Atlantia shares slid nearly 8% to the bottom of the Stoxx 600 on the back of Friday's arrests. AMS fell more than 2% after the management and supervisory boards of Osram Licht, which is subject to a takeover offer from the Austrian chipmaker, expressed concerns about its strategy.

Politico reported that the World Trade Organization (WTO) will rule in favor of the U.S. in a long-running dispute with the European Union over its subsidies granted to aerospace giant Airbus. The decision would give Washington a green light to impose billions of euros in punitive tariffs on EU products. Shares of Air France KLM, Airbus and Lufthansa lost around 3% each.