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

New York (AFP) – Global stocks mostly fell Wednesday amid uncertainty over trade and an escalating Indian-Pakistan conflict as the British pound rallied for a second session.

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

While both sides have sought to play down the threat of war, the rare aerial engagement over the divided and disputed territory of Kashmir significantly raised the stakes in a standoff sparked by a suicide attack on the Indian-controlled side earlier this month.

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

Markets in Asia finished mixed, while Paris, London and Frankfurt all declined. On Wall Street, both the Dow and S&P 500 retreated, while the Nasdaq edged higher.

Investors eyed a series of high-profile hearings in Washington, including a session on trade with US Trade Representative Robert Lighthizer, who reported “real progress” on talks with China but said significant work still needed to be undertaken before a final deal is struck.

President Donald Trump’s former attorney Michael Cohen revealed a litany of charges about his former boss in an explosive hearing that captivated political observers but did not appreciably move stocks.

The British pound advanced for a second day after British MPs overwhelmingly voted to give Prime Minister Theresa May more time to work on her EU withdrawal deal after she promised they could delay Brexit if necessary.

Any delay must be approved by the other 27 EU member states and the bloc’s leaders have agreed to look at any request from Britain.

But some questioned what it would achieve without a breakthrough in London, where MPs still cannot agree how to implement the 2016 Brexit referendum result.

Oil prices rose after US petroleum stockpiles showed a drop in supplies.

Among individual companies, Air France-KLM tumbled over 10 percent after Paris reacted bitterly to a move by the Dutch government to take a stake in the airline almost equal to that held by the French government.

US health insurers UnitedHealth Group and Humana each lost almost five percent, and rival Cigna shed 4.0 percent after Democratic US Representative Pramila Jayapal introduced “Medicare for all” legislation targeting insurance industry profits.

The bill is still a long way from becoming law but the proposal indicates strengthening momentum for the issue among progressive Democrats.

– Key figures around 2150 GMT – 

New York – Dow: DOWN 0.3 percent at 25,985.16 (close)

New York – S&P 500: DOWN 0.1 percent at 2,792.38 (close)

New York – Nasdaq: UP 0.1 percent at 7,554.51 (close)

London – FTSE 100: DOWN 0.6 percent at 7,107.20 (close)

Frankfurt – DAX 30: DOWN 0.5 percent at 11,487.33 (close)

Paris – CAC 40: DOWN 0.3 percent at 5,225.35 (close)

EURO STOXX 50: DOWN 0.2 percent at 3,282.77 (close)

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)

Pound/dollar: UP at $1.3306 from $1.3252

Euro/pound: DOWN at 85.45 pence from 85.95 pence

Euro/dollar: DOWN at $1.1372 from $1.1389 at 2200 GMT

Dollar/yen: UP at 111.00 yen from 110.59 yen

Oil – Brent Crude: UP $1.18 at $66.39 per barrel

Oil – West Texas Intermediate: UP $1.44 at $57.94 per barrel

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