Sterling has rallied on hopes Britain will avoid a no-deal Brexit, which economists warn could hammer the country’s economy (Justin TALLIS)

London (AFP) – Europe’s stock markets fell Wednesday with sentiment dented by heightened geopolitical worries, dealers said.

An Asian market rally ran out of steam after Pakistan said it had shot down two Indian jets in its airspace in Kashmir, fuelling concerns of conflict between the nuclear-armed rivals.

London equities fell 0.8 percent nearing the half-way stage, owing to a strong pound, which extended gains on receding fears of a no-deal Brexit.

In the eurozone, Frankfurt dropped 0.6 percent and Paris slid 0.3 percent.

“Rising geopolitical tensions dominates trading, sending global equities… lower as India clashes with Pakistan,” said Oanda analyst Dean Popplewell.

Trading floors were shaken in Asia by a statement from the Pakistan Air Force that it had downed the two planes and arrested one of the pilots.

That came as Indian sources said Pakistani fighter jets had violated airspace over Indian Kashmir, but were forced back over the de facto border of the disputed territory.

The developments came a day after warplanes struck a site in Pakistan that New Delhi said was a militant training camp, in retaliation for a February 14 suicide bombing in the disputed region that killed 40 Indian troops.

Islamabad has vowed to retaliate — fuelling fears of a dangerous confrontation.

– Trump-Kim summit –

Meanwhile, investors remain on tenterhooks over US President Donald Trump’s summit with North Korean leader Kim Jong Un.

And there remains lingering uncertainty over the long-running trade dispute between Beijing and Washington.

“Equity markets are in the red … as geopolitics is playing on traders’ minds,” said CMC Markets analyst David Madden.

“President Trump is set to meet with the North Korean Leader, Kim Jong-un, to discuss the denuclearisation of the Korean Peninsula.

“Investors are still wondering when will the US-China trade spat will be resolved.

“We heard this week that tariffs on Chinese imports won’t be hiked in March, but the trade dispute still needs to be finalised, and we are still a long way from the end result.”

On currency markets, hopes that Britain will not leave the European Union without a divorce pact in place provided more support to the pound.

Sterling had already surged Tuesday on Prime Minister Theresa May’s decision to let MPs vote on a three-month delay to the March 29 Brexit deadline if she is unable to ram through her own deal.

The UK retail sector was also in the spotlight after Marks and Spencer revealed it would team up with online supermarket Ocado to deliver M&S food direct to homes.

But M&S shares dived 9.5 percent to 274.30 pence after saying it would slash its dividend — and raise up to £600 million from a rights issue to help fund the deal.

On the upside, Ocado shares jumped 4.8 percent to 1,038 pence, topping London’s FTSE 100.

– Key figures around 1200 GMT – 

London – FTSE 100: DOWN 0.8 percent at 7,091.76 points

Frankfurt – DAX 30: DOWN 0.6 percent at 11,475.11

Paris – CAC 40: DOWN 0.3 percent at 5,223.96

EURO STOXX 50: DOWN 0.4 percent at 3,277.25

Tokyo – Nikkei 225: UP 0.5 percent at 21,556.51 (close)

Hong Kong – Hang Seng: DOWN 0.1 percent at 28,757.44 (close)

Shanghai – Composite: UP 0.4 percent at 2,953.82 (close)

New York – Dow: DOWN 0.1 percent at 26,057.98 (close)

Pound/dollar: UP at $1.3281 from $1.3252

Euro/pound: DOWN at 85.81 pence from 85.95 pence

Euro/dollar: UP at $1.1395 from $1.1389 at 2200 GMT

Dollar/yen: DOWN at 110.42 yen from 110.59 yen

Oil – Brent Crude: UP 78 cents at $65.99 per barrel

Oil – West Texas Intermediate: UP 85 cents at $56.35

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