LONDON: European and US stock markets fell on Wednesday (Feb 27) 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 did worse than its eurozone peers owing to a strong pound, which extended gains on receding fears of a no-deal Brexit.
Wall Street was also lower as midday approached in New York.
"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 two Indian planes and arrested one of the pilots.
New Delhi confirmed the loss of one of its planes and said it had shot down a Pakistani fighter jet.
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 raises the stakes in a standoff sparked by a suicide attack on the Indian-controlled side earlier this month.
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 Feb 14 suicide bombing in the disputed region that killed 40 Indian troops.
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.
In addition to the Trump-Kim meeting, investors are still watching for any movement towards resolving the US-China trade spat.
"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," said Madden.
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 Mar 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 after the company said it would slash its dividend - and raise up to £600 million from a rights issue to help fund the deal.
Shares in Air France-KLM tumbled over 10 per cent 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.
Key figures around 1640 GMT:
London - FTSE 100: DOWN 0.6 per cent at 7,107.20 points (close)
Frankfurt - DAX 30: DOWN 0.5 per cent at 11,487.33 (close)
Paris - CAC 40: DOWN 0.3 per cent at 5,225.35 (close)
EURO STOXX 50: DOWN 0.2 per cent at 3,282.77
New York - Dow: DOWN 0.4 per cent at 25,943.81
Tokyo - Nikkei 225: UP 0.5 per cent at 21,556.51 (close)
Hong Kong - Hang Seng: DOWN 0.1 per cent at 28,757.44 (close)
Shanghai - Composite: UP 0.4 per cent at 2,953.82 (close)
Pound/dollar: UP at US$1.3307 from US$1.3252
Euro/pound: DOWN at 85.45 pence from 85.95 pence
Euro/dollar: DOWN at US$1.1371 from US$1.1389 at 2200 GMT
Dollar/yen: UP at 110.93 yen from 110.59 yen
Oil - Brent Crude: UP US$1.47 at US$66.83 per barrel
Oil - West Texas Intermediate: UP US$1.78 at US$57.28 per barrel