Oil led commodities to a nine-month high on concern that turmoil in Iraq will disrupt supplies. European stocks fell while the U.K. pound strengthened after the central bank chief said interest rates may rise earlier than investors expect.
The Standard & Poor’s GSCI (SPGSCI) gauge of 24 raw materials rose 0.6 percent at 9:41 a.m. in London, after climbing as much as 1 percent to the highest level since Aug. 29. Brent jumped 1 percent to $114.18 a barrel and copper gained 0.6 percent. The Stoxx Europe 600 Index fell 0.4 percent and S&P 500 Index futures were little changed. The pound climbed 0.3 percent to $1.6977.
Escalating violence in Iraq is threatening supplies from OPEC’s second-biggest oil producer and U.S. President Barack Obama said he won’t rule out using air strikes to help the government beat back Islamist militants. Bank of England Governor Mark Carney said rates may rise earlier than investors expect and expressed concern that mounting debt related to the housing market could undermine stability. U.S. consumer confidence probably improved this month, economists said before a report today, after data showed China’s retail sales and industrial output grew.
“The Iraq situation has the potential to become more significant, so people are naturally concerned,” said Angus Gluskie, a fund manager who helps oversee more than $550 million at White Funds Management in Sydney. Any pullback will be limited because “the underlying factors that have driven the market higher haven’t really changed. They’re still reasonably strong.”
Iraqi forces sought to check the rapid advance of Islamist militants who had seized major cities, as Prime Minister Nouri al-Maliki responded to the greatest threat to his government since taking power. The Shiite-led government is struggling to retain control of Sunni-majority regions, and al-Maliki’s army units in northern Iraq collapsed in the face of the Islamist advance.
The S&P GSCI climbed to the highest since Aug. 29, as Brent advanced to $114.69 a barrel, the most since Sept. 9. West Texas Intermediate oil rose as much as 1.2 percent to $107.68 a barrel, the highest since Sept. 19. Copper advanced 0.6 percent to $6,660 a metric ton.
“There’s potential for disruption to spread around the Middle East and we’re talking about significant amounts of daily supply,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney, who predicts Brent may climb to $125 a barrel if there’s an attack on Baghdad. “The market got concerned about potential disruption in Libya; Iraq is a much more serious situation.”
Five shares fell for every one that gained in the Stoxx 600, with travel and leisure companies, automakers and developers leading declines while oil producers climbed.