* European stocks hit 22-month low, Wall Street futures flat
* China and Japan stocks tumble in tough start to week forAsia
* Oil climbs as fate of missing journalist impacts Saudirelations
* Yen, Swiss franc, gold, bunds among safe havens to shine
* Sterling recovers from latest Brexit wobbleBy Marc JonesLONDON, Oct 15 (Reuters) - World markets turned tail againon Monday, as a bounceback in oil prices and rising tensionsbetween Western powers and Saudi Arabia added to a cocktail ofconcerns that battered global stocks last week.Japan's Nikkei and China's main bourses tumbledagain overnight as trade concerns persisted, and Europe's STOXX600 index hit a 22-month low as U.S. markets preparedto re-open after their worst week since March. The lack of confidence continued to boost traditional safehaven assets. The yen and Swiss franc both madeground on a subdued dollar in the currency markets whilegold hit its highest since the end of July. Germany's government bonds also rallied and the euro climbedas high as $1.16 despite a humbling regional electionresult for Chancellor Angela Merkel's conservative Bavarianallies on Sunday. "I don't think there is really any appetite to dive back in(to stocks), and the Saudi situation is just another ball forinvestors to have to juggle," said CMC Markets' senior analystMichael Hewson.
"If the trend we saw last week continues, it is going to bevery hard for Europe to rally... The outlook remains veryuncertain," Hewson added.The Saudi situation remained front and centre after Riyadhappeared to retaliate to U.S. President Donald Trump's promiseof "severe punishment" if it turns out that prominent Saudidissident Jamal Khashoggi, a U.S. resident and Washington Postcolumnist, was killed while visiting his country's consulate inIstanbul.The official Saudi Press Agency (SPA) quoted an unnamedofficial on Sunday saying the kingdom "will respond with greateraction," if there are measures and that its economy "has aninfluential and vital role in the global economy." Traders read that as meaning driving oil prices up further.Brent crude responded by jumping 1 percent which in turnsaw Saudi stocks recover the full 3.5 percent they hadlost on Sunday when the diplomatic tensions flared.Turkey's lira was another big riser on Monday,jumping 1.5 percent to its highest since mid-August after Trumpcheered the release of a U.S. pastor who had been under housearrest in Turkey.Investors hope his release can lead to an improvement instrained U.S.-Turkey relations."The lira is likely to benefit at least modestly during theperiod between now and the CBT (central bank) meeting of 25October where we anticipate the next 300 bps rate hike," INGanalysts wrote in a note.
CHINA AMMUNITIONBut the broader global picture was still cautious.Wall Street futures remained red albeit only just ,while Saudi Arabia's riyal currency was still testing theboundaries of its peg at 3.7514 to the dollar - its weakest spotrate since June 2017.The Saudi central bank maintains a peg of 3.75 riyals to thedollar, and usually the currency fluctuates in a range of about3.7498-3.7503. Overnight, MSCI's broadest index of Asia-Pacific sharesoutside Japan had fallen 1 percent as Shanghai ended down 1.5 percent and just off a four-year low. Japan's Nikkei slumped 1.8 percent on Monday, withcarmaker shares hitting 13-month lows afterWashington said it would seek a provision about currencymanipulation in future trade deals with Japan. MSCI's broadest gauge of the world's 47 top stock markets was off 0.2 percent after a sizeable 3.87percent decline last week - its biggest since March - to aone-year nadir.Over the weekend, China central bank governor Yi Gang said
he still saw plenty of room for adjustment in interest rates andthe reserve requirement ratio (RRR), as downside risks fromtrade tensions with the United States remain significant. In London, sterling recovered from renewed Brexitdeal worries , while commodities trading remainedhung up on the Saudi tensions and the risk they could drive upprices.
Saudi Energy Minister Khalid al-Falih had said on a trip to
India that his country is planning to push up production , but the prospect of a major diplomatic feud withthe West trumped that sentiment.Investors suspect the developments could ultimatelyundermine the leadership of Crown Prince Mohammed bin Salman ifthey escalate and destabilise the oil-rich kingdom.
Brent crude futures were last up 1 percent to $81.26per barrel, bouncing back from Friday's near-three-week low of$79.23."People had thought the Saudis would make up for the fall inIran's output. If they are starting to use oil as their weapon,that will be a whole new chapter," said Kazuhiko Fuji, seniorfellow at Research Institute of Economy, Trade and Industry, athink-tank affiliated with the Japanese government. (Reporting by Marc Jones; Additional reporting by Hideyuki Sanoin Tokyo; Editing by Gareth Jones and Hugh Lawson)
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