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Shares struggle, oil rises

Investors tensions over fighting in Iraq and Ukraine saw a global shift into traditional safe-haven currencies, precious metals and bonds on Monday, and oil hovered near a nine-month high.

The mood also spread to share markets. The Nikkei in Tokyo saw its biggest fall in a month and European bourses started 0.2 per cent in the red having just about held on for a ninth week of back-to-back gains on Friday.

Worries about Iraq were intensifying after insurgents from the Islamic State of Iraq and the Levant (ISIL) seized a mainly ethnic Turkmen city in the northwest of the country over the weekend.

It continued to drive fears about widespread turmoil in the country and region. Iraq is Opec’s second largest producer.

Brent crude for August delivery was up 4 cents at $112.50 a barrel by 1342 GMT, after touching an intraday high of $113.28. The July contract, which expired on Friday, settled 39 cents higher at $113.41 per barrel, the highest settlement since September 2013.

The rising oil prices and shrinking risk appetite weighed on emerging Asian currencies particularly, with the rupee hitting a six-week low and the rupiah and the South Korean won also withering.

Among the major currencies the yen and Swiss franc rose. The dollar slipped about 0.3 per cent to 101.76 yen, moving back toward a two-week low of 101.60 yen marked on Thursday. Against the euro it added about 0.1 per cent on the day to $1.3551. The sterling topped $1.70 for the first time since August 2009 on Monday, adding to gains from last week.

Spot gold rose 0.4 per cent to $1,281.36 an ounce by 1221 GMT, having hit its highest since May 27 at $1,284.85 earlier in the session.

Russian shares fell sharply, with the dollar-denominated RTS index down 2.5 per cent and Gazprom down 2.0 per cent at 143.47 roubles.

Top-rated euro zone bonds pushed higher as concerns over the escalating geopolitical tensions supported safe-haven government debt though gains were limited ahead of the US Federal Reserve’s policy meeting this week.

“Key points are if Fed Chair (Janet) Yellen upgrades her view on the economic view in light of recent economic indicators and if the central bank raises its yield forecast,” said Junichi Ishikawa, market strategist at IG Securities in Tokyo.

Other data in focus this week is China’s latest report on foreign direct investment on Tuesday, and then house price figures on Wednesday.

China’s Shanghai Composite Index added 0.7 per cent on Monday, helped by some publicly listed Chinese banks qualifying for a reduction in reserve requirements announced by the central bank last week, according to bankers.