GLOBAL MARKETS-Iraq unrest drives up oil; equities slip

Fri Jun 13, 2014 10:17am EDT

(Updates, adds quote, recasts at top, changes byline, changes
dateline, previous LONDON)
    * Iraq fighting boosts oil, saps global equity averages
    * Sterling surges after clear rate hike talk from BoE
    * Stocks drop back

    By David Gaffen and Marc Jones
    NEW YORK/LONDON, June 13 (Reuters) - Escalating violence in
Iraq drove oil higher and sent stocks lower on Friday, putting a
global equity index on track for its first weekly loss in five
weeks.
    Wall Street was little changed, but U.S. averages were set
for their first loss in four weeks, while European shares
 were set to interrupt eight weeks of gains. The MSCI
All World Index fell 0.2 percent and is down 0.5
percent for the week.
    Despite the decline in riskier assets, benchmark U.S. bond
prices fell, pushing yields slightly higher. Sterling surged on
Friday after the Bank of England hinted at an interest rate rise
this year. 
    Financial markets' focus was on the violence in Iraq where
Sunni Islamist militants have surged out of the north this week
to menace Baghdad and want to establish their own state in Iraq
and Syria. President Barack Obama on Thursday threatened U.S.
military strikes in Iraq against the insurgents.
    "The market was looking for an excuse to take profits after
a rally to new highs and tensions in Iraq gave investors an
opportunity to trim their positions," said Philippe Gijsels,
head of research at BNP Paribas Fortis Global Markets in
Brussels.
    Oil rose, with Brent crude at one point touching a
nine-month high of $114.69. It was last up just a few cents to
$113.05. U.S. crude touched an intraday high of $107.68
before pulling back, up 19 cents to $106.71. The benchmark is up
about 4 percent this week.
    "There was a big market reaction and then the IEA
(International Energy Agency) said it did not see a risk to
supplies so the volatility is reflecting this," said Olivier
Jakob at Petromatrix consultancy.
    The IEA played down fears over the possible sudden loss of
oil exports from Iraq in its monthly oil market report.
    The S&P 500 gained 1.59 points or 0.08 percent, to
1,931.7 and the Nasdaq Composite added 10.38 points or
0.24 percent, to 4,308.01.
    Bank of England Governor Mark Carney said late Thursday
British interest rates could rise sooner than markets expect.
Markets had previously been expecting a rate hike in the first
quarter of 2015, and the FTSE 100 was down nearly 1
percent. 
    It would make the BoE the first of the four major central
banks to raise interest rates. Sterling neared a
five-year high against the dollar at $1.6951 on Carney's
comments and hit a 1-1/2 year high of 1.2525 euros.
The gap between 2-year UK and German yields ballooned to its
widest in four years.

  

 (Additional reporting by Anirban Nag, Julia Payne and
Christopher Johnson; Editing by Nick Zieminski)