Stocks fall, Europe futures sink on energy crisis: Markets fold

(Bloomberg) — European stock futures fell and the euro slipped on Monday as a worsening energy crisis in the region fueled concerns about a global economy already grappling with high inflation and a wave of monetary tightening.

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European futures fell 3 percent and Asian shares were in the red amid losses in Japan, China and Hong Kong, where technology shares fell as traders weighed the risk of curbing U.S. investment. U.S. futures wobbled after the worst week for global stocks since hitting market lows in June.

The dollar was steady as commodity-linked currencies joined the euro’s retreat. Crude jumped above $88 a barrel ahead of the OPEC+ meeting on supply and as investors weighed the latest upheavals in the energy sector.

Gazprom PJSC last week again cut its key European natural gas pipeline indefinitely after Group of Seven leaders agreed to impose a price cap on Russian oil as the Kremlin continues its war in Ukraine.

European ministers will discuss special measures to curb rising electricity costs, from caps on natural gas prices to the suspension of energy derivatives trading. Germany – hardest hit by the disruption of the Nord Stream pipeline – unveiled a $65 billion package to protect consumers.

There are no cash trades due to the Labor Day break, which also closes the US stock market. Bonds moved higher in Australia.

Monetary authorities, including Europe’s central bank, are set to continue raising interest rates this week to fight inflation despite a gloomy global economic outlook due to risks such as natural gas shortages and Covid restrictions in China. A consequent advance in real yields — considered the true cost of money to borrowers — is a drag on a variety of risk assets.

“The EU energy situation highlights the very challenging environment for central banks as they normalize policy settings and continue to increase,” said Su-Lin Ong, head of Australian economic strategy and fixed income at Royal Bank of Canada.

Markets also face more uncertainty from US-China tension – the Biden administration is considering moves to limit US investment in Chinese tech companies and will allow Trump-era import tariffs on goods to continue while tariffs are revised.

China has extended a lockdown in districts of the major city of Chengdu and ordered more mass testing there as it tries to contain the Covid outbreak.

In the UK, Conservative Party members are expected to name Liz Truss as their leader, paving the way for her to become prime minister. Her plan to “turbo-charge” the economy by cutting taxes is already worrying investors amid double-digit inflation. The British pound fell against the dollar.

Elsewhere, Bitcoin was hovering near the $20,000 level. Gold was little changed.

What to watch this week:

  • The UK Prime Minister will be announced on Monday

  • OPEC+ meeting on the offer, Monday

  • Australia interest rate decision, Tuesday

  • Apple’s event is expected to showcase new iPhones, watches, on Wednesday

  • Bank of England Governor Andrew Bailey at the Finance Committee on Wednesday

  • Beige Fed Regional Economic Activity Book, Wednesday

  • Cleveland Fed President Loretta Mester is scheduled to speak on Wednesday

  • European Central Bank interest rate decision, Thursday

  • Fed Chairman Jerome Powell speaks at a Cato Institute conference in Washington on Thursday

  • Reserve Bank of Australia Governor Philip Lowe speaks at the event on Thursday

  • China PPI, overall financing, money supply, new yuan loans, Friday

  • Emergency meeting of EU energy ministers on emergency intervention in electricity markets on Friday

Some of the main movements in the markets:

inventories

  • S&P 500 futures were up 0.1% at 10:46 AM. in Tokyo. The S&P 500 fell 1.1%

  • Nasdaq 100 futures were flat. The Nasdaq 100 fell 1.4%

  • Japan’s Topix lost 0.2%

  • Australia’s S&P/ASX 200 rose 0.2%

  • South Korea’s Kospi rose 0.2%

  • China’s Shanghai Composite fell 0.3%

  • Hong Kong’s Hang Seng Index fell 1.5%

  • Euro Stoxx 50 futures sank 3.1%

currency

  • The Bloomberg Dollar Spot index rose 0.2%

  • The euro fell 0.3% to $0.9920

  • The Japanese yen was at 140.23 yen per dollar

  • The offshore yuan was down 0.2% at 6.9289 per dollar

Bindings

Goods

  • West Texas Intermediate crude rose 1.8% to $88.40 a barrel

  • Gold was at $1,711.54 an ounce

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