Europe midday: Stocks fall back as tensions in Middle East flare up again

Investors were seeking out safe havens at the end of the week following a US military strike against a top Iranian commander that reminded investors of the plethora of geopolitical risks that were lurking on the horizon in 2020.

Overnight, Qassem Soleimani, the head of the Iranian Revolutionary Guard's Quds force, who was responsible for coordinating military forces in the Middle East, was killed in a drone strike in retalition for the attacks orchestrated against US military forces in the region by forces under his command, most recently by Kataeb Hezbollah in Kirkuk, on 27 December.

Soleimani was described by some as the second most important person in Iran, after the Grand Ayatollah.

"Iran right now is reeling from the assassination, but the leadership is dominated by hardliners and the question is how, not whether, they will respond. For markets, the key issue is the impact of the Iranian response on oil prices," said Ian Shepherdson at Pantheon Macroeconomics.

"Our base case here is that a full-blown war between the U.S. and Iran is unlikely, though we appreciate the old adage that nothing brings a country together more effectively than an external threat, and Iran's government right now is extremely unpopular."

To take note of, several hundred Iranian civilians had been killed by government forces in recent protests in the country.

As of 1231 GMT, the benchmark Stoxx 600 was down by 0.76% to 416.55 and the German Dax was 1.71% weaker to 13,156.97.

France's Cac-40 on the other hand was off by a lesser 0.48% to 6,012.28 and the Ibex 35 by 0.90% to 9,604.0.

In parallel, front month Brent crude oil futures on ICE were 3.86% higher to $68.91 while the February gold contract on COMEX was 1.31% higher to $1,548.10/oz. and the yield on the benchmark 10-year German bund was down by seven basis points at -0.29%.

To take note of too, the day before the Turkish Parliament approved a bill authorising sending troops to Libya in support of the internationally-recognised government in the North African country.

Defensives were also the flavour of the day in the equity space, with investors picking up the likes of Swedish Match, Polymetal or British American Tobacco, together with oil sector names such as Technip, SBM Offshore, Galp Energia, John Wood Group and BP.

Also moving higher was Spain's Cellnex after clinching the acquisition of Portuguese telecommunications towers and sites operator OMTEL in a transaction that valued the company at €800.0m.

Simultaneoulsy, investors dumped airlines, including Deutsche Lufthansa, Air France-KLM and Easyjet.

The latest economic data did little to offset the negative geopolitical news, with readings on inflation in France and Germany, as well as for German jobless claims all coming in ahead of forecasts.

According to France's national statistics office, INSEE, harmonised consumer prices accelerated to a year-on-year pace of 1.6% in December, following a reading of 1.2% for November (consensus: 1.4%).

Similarly, inflation in the German region of Saxony also climbed at the end of 2019, reaching 1.4%.

In other German news, the rate of unemployment was unchanged from the month before at 5.0%, as expected, although jobless claims bounced back by a slightly higher than anticipated 8,000 (consensus: 4,000).

And Claus Vistesen at Pantheon Macroeconomics noted the recent sharp slide in vacancies, which he said augured a slight increase in the unemployment rate over the next six to nine months.

CAC 40 - Risers

TECHNIPFMC (FTI) 19.37 +2.33%

Publicis Groupe Sa (PUB) 40.93 +0.62%

Total (FP) 50.11 +0.59%

Orange. (ORA) 13.23 +0.39%

Safran (SAF) 137.94 +0.25%

Vivendi (VIV) 26.28 +0.13%

Danone (BN) 74.08 +0.13%

Dassault Systemes (DSY) 147.49 +0.13%

Pernod Ricard (RI) 160.49 +0.08%

CAC 40 - Fallers

ArcelorMittal SA (MT) 15.34 -3.08%

Peugeot (UG) 21.24 -2.30%

Bouygues (EN) 37.77 -2.16%

Saint Gobain (SGO) 36.29 -1.87%

Renault (RNO) 41.14 -1.82%

Societe Generale S.A. (GLE) 31.21 -1.39%

BNP Paribas (BNP) 52.87 -1.33%

Accor (AC) 41.24 -1.25%

Michelin (ML) 107.09 -1.25%

Vinci (DG) 98.60 -1.24%