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[LONDON] European stocks, which were recovering from early losses and set to finish the first trading day of December in positive territory, fell suddenly after ex-US national security adviser Michael Flynn pleaded guilty to lying to the FBI.
US stocks and the US dollar fell as ABC News reported that Flynn was prepared to testify that President Donald Trump directed him to make contact with the Russians.
The news triggered a rise in the euro and in the pound, which hurt stocks as investors questioned the ability of the US president to implement his tax cuts or simply to survive the political storm.
"The old chatter from the summer about President Trump being impeached has surfaced again", David Madden, an analyst at CMC Markets commented.
Britain's FTSE slid 0.36 per cent and Euro zone stocks fell 1.06 per cent.
Booming data showing euro zone factories had their busiest month for more than 17 years failed to lift euro zone stocks in morning trading.
Oil and gas was among the only sectors to post a positive performance, thanks to rising oil prices after Opec and other major producers agreed to continue reining in output. BP rose 0.6 per cent and Royal Dutch Shell added 0.2 per cent.
The Travel and Leisure index also rose 0.31 per cent after Deutsche Bank took a positive view of transport stocks and and upgraded Lufthansa and Air France-KLM, which rose 1.3 per cent and 0.9 per cent respectively.
Dialog, hammered on Thursday by a press report Apple would in-source its power chip design, removing a crucial supplier relationship for the German firm, recovered on Friday to trade up 2.4 per cent.
Some healthcare stocks also outperformed. A Morgan Stanley upgrade boosted UCB by 1.6 per cent. Novo Nordisk , one of the strategists' pharma favourites, gained one per cent.
British pharma company Indivior also shot up 11.2 per cent after the US Food and Drug Administration approved its opioid addiction drug.
French telecom company Altice - whose shares sank 59 per cent in November after disappointing results - gained 0.5 per cent after saying it would sell data centre and Swiss telecoms businesses to reduce its 50 billion-euro debt.
The high-flying tech sector fell 1.58 per cent in a sign of investors' anxiety about parts of the market that have seen stellar performance and inflows this year.
Financials also weighed with Santander losing 2.5 per cent, Barclays 2.1 per cent and Lloyds 1.9 per cent.
The automakers index was down 1.9 per cent. Among factors explaining the gloom in the sector, Citi decided to downgrade Peugeot's rating, arguing that "turning Opel around is likely to be costly and time-consuming". The French carmaker fell 2.2 per cent.