Growing expectations of increased oil supply hit crude prices on Friday, lifting the U.S. dollar and weighing on energy shares, while political upheaval in Europe and uncertainty over a U.S.-North Korea summit restrained equity markets.
Brent crude futures fell $2.35, or 3 percent, to settle at $76.44 a barrel after Saudi Arabia and Russia said they were ready to ease supply curbs that have pushed prices to their highest since 2014.
President Donald Trump on Friday signaled that a June 12 meeting with North Korean leader Kim Jong Un could still take place a day after he canceled the planned historic summit.
That led to a dip in gold prices, but it did little to increase demand for risk assets, investors said.
“At this point investors are shrugging off Washington headlines because in most cases they won’t affect the markets and Washington has a hard time following through what they say,” said Arian Vojdani, investment strategist at MV Financial in Bethesda, Maryland.
Gold prices dropped slightly after Trump’s latest North Korea comments, but remained above $1,300 per ounce.
Wall Street ended mostly down as oil prices dragged down energy stocks ahead of a holiday weekend in the United States, which typically leads to low volume.
The Dow Jones Industrial Average fell 59.15 points, or 0.24 percent, to 24,752.61, the S&P 500 lost 6.46 points, or 0.24 percent, to 2,721.3 and the Nasdaq Composite added 9.43 points, or 0.13 percent, to 7,433.85.
The S&P energy index slid 2.9 percent, while Chevron dropped 3.7 percent and Exxon Mobil fell 2.1 percent and were the biggest drags on the Dow.
The tech-heavy Nasdaq was aided by chipmakers, led by a 2.6 percent jump in Broadcom.
U.S. Treasury yields fell to their lowest level in three weeks as concerns about Italy’s new government and a leadership change in Spain boosted appetite for low-risk investments.
Italian Prime Minister-designate Giuseppe Conte began assembling his Cabinet on Thursday, with party leaders pushing for an 81-year-old euroskeptic economist to be given the pivotal post of economy minister. Italy’s president is opposing the appointee.
Political risk also reared its head in Spain, where a threat of no-confidence motions against Prime Minister Mariano Rajoy sent Spanish stocks and bond prices plunging.
The pan-European FTSEurofirst 300 index rose 0.05 percent and MSCI’s gauge of stocks across the globe shed 0.29 percent.
While yields on German and U.S. bonds fell amid the uncertainty, there have been few signs of a wide-ranging sell-off in higher-risk assets – Wall Street’s volatility index stayed near four-month lows.
“Market reaction to heightened political risk remains reasonably muted,” Indosuez Wealth Management global head of economic research Marie Owens Thomsen said.
She cited the example of Turkey and Italy, where a stock and bond sell-off has not spilled much into other emerging economies or euro zone states.
However, worry about Italy kept the euro under pressure against the dollar.
The dollar index rose 0.48 percent, with the euro down 0.53 percent to $1.1657.
The dollar has rebounded after touching two-week lows versus a basket of currencies on Thursday, helped by gains against commodity-linked currencies, as oil prices fell.
Elsewhere, worries that investors could shift assets from emerging markets to higher-yielding U.S. bonds have been a major headwind for emerging markets this year. Turkey has been the worst hit.