Europe midday: Stoxx clings to gains as oil spike raises inflation fears

(Sharecast News) - European shares clung on to gains on Friday, as comments from US President Joe Biden that his administration held discussions with Israel on potential attacks against Iranian oil facilities pushed up the price of crude and stoked inflationary fears among investors. The pan-regional Stoxx 600 index was up 0.06% to 516.60 with major bourses mixed. Traders are looking ahead to US non-farm payrolls for September, expected to grow by 140,000.

In the Middle East Israel kept up its relentless strikes on Lebanon in parallel with its invasion of the country as Biden said his administration had been "discussing" possible Israeli plans to attack Iran's oil industry in retaliation for the Iranian ballistic missile attack on Tuesday, but did not elaborate on what level talks had reached.

Oil prices continued to rally - pushing beyond $78 a barrel - on the back of Biden's remarks, further fuelled by comments by former Israeli prime minister Ehud Barak, who predicted that Israel was likely to mount a large-scale airstrike against Iran's oil industry and possibly a military target related to its nuclear programme.

Britain's FTSE 100 was down after Bank of England chief economist Huw Pill urged caution on interest rate cuts, in contrast to more dovish comments from Governor Andrew Bailey on Thursday.

In a speech, Pill said there was still "ample reason for caution" when assessing inflationary persistence.

"While further cuts in bank rate remain in prospect, should the economic and inflation outlook evolve broadly as expected, it will be important to guard against the risk of cutting rates either too far or too fast," he said.

Scope Markets analyst Joshua Mahony said that while markets were still expecting cuts in both November and December, "Pill's preference to remain restrictive in a bid to drive down underlying inflation does highlight the lack of a central dovish narrative that markets might believe exists".

Meanwhile, the decline in construction across the eurozone eased slightly in September, but the downturn remained firmly entrenched, with every member state reporting a contraction in activity.

The eurozone construction purchasing managers' index (PMI), compiled by S&P Global and Hamburg Commercial Bank, increased to 42.9 last month, after hitting a six-month low of 41.4 in August.

However, the PMI has now remained below the key 50-point level which separates growth and contraction for 29 straight months.

In equity news, shares in shipping firms Moeller-Maersk and Hapag Lloyd were both lower on geopolitical tensions and the settling of the Los Angeles port workers strike.

DSV surged after issuing new shares to investors, raising around €5bn to help fund its purchase of Schenker, the logistics arm of German state rail operator Deutsche Bahn.

Reporting by Frank Prenesti for Sharecast.com