Stocks erase losses, oil tumbles after Trump says US will end $4 billion funding to Israel

By Niket Nishant and Gregor Stuart Hunter

Nov 3 (Reuters) - Stocks in Europe and the US reversed course to trade higher on Tuesday as oil prices dropped after US President Donald Trump said Washington would stop $4 ​billion in funding to Israel after the end of this year.

Speaking to Fox News' Fox and ‌Friends, Trump said Israel no longer needed the funding. He had made a deal with Israeli Prime Minister Benjamin Netanyahu to stop the aid, he said.

The comments sent oil prices lower and helped stocks reverse their losses. The pan-European STOXX 600 index rose 0.13% to 650.3 points, while futures tracking the benchmark S&P 500 index added 0.14%.

AI ANXIETY KNOCKS STOCKS IN ASIA

The gains offered some relief after a fresh bout of AI anxiety unnerved investors, who are also on tenterhooks as voting began in crucial US midterm elections.    

Opinion polls show the Democrats are likely to take the House, while the Senate is too close to call. A sweep by Democrats could lead to tougher oversight of AI and more corporate regulation.

"In the case of a full blue sweep, I would expect some populist measures against AI. The narrative against data centres would get a tailwind," said Alexander Lis, chief investment officer at Social Discovery Ventures.

South Korea's KOSPI benchmark fell 3.6%, while Taiwan's index also dropped 3.6% for its steepest one-day decline since late July.

The dollar index, which measures the currency against a basket of peers, was flat at 101.81. It hit a one-month low on Monday.

The yield on the US 10-year Treasury note rose 2.5 basis points to 4.9187%.

A surprise Republican sweep would likely lift yields and the dollar, said Steve Englander, co-head of FX research at Standard Chartered.     

Brent crude futures fell 2.9% to $101.75 a barrel. Oil prices have whipsawed this week on conflicting signals from the US and Iran on ending the war in the Middle East. 

"I don't think you could build a high conviction view based on the Iran developments right now. And I think more investors should think the same way as I do," said Lis.

APPLE ADDS TO EARNINGS ANGST

Apple on Monday forecast lower gross margins for the crucial holiday quarter, citing rising memory-chip costs, and projected services revenue growth that fell well short of Wall Street expectations.

The iPhone maker's forecasts deepened the gloom in markets, which have been disappointed by lukewarm results from tech heavyweights.

Separately, the Chinese yuan weakened against the US dollar after the People's Bank of China said it would raise the foreign exchange reserve ratio, a move aimed at putting the brakes on a long rally in the yuan.

Cryptocurrencies remained choppy after last week's Binance hack. Bitcoin nudged 0.5% higher to $77,110.83 and ether rose 1% to $2,278.10.

(Reporting by Niket Nishant in Bengaluru and Gregor Stuart Hunter in Singapore. Editing by Jamie Freed, Mark Potter and Jan Harvey)