Stocks tumble, European futures tumble on energy crisis: Markets soar

European stock futures fell and the euro fell on Monday as the deepening energy crisis in the region added to concerns about a global economy already facing high inflation and a wave of monetary tightening.

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(Bloomberg) — European equity futures tumbled and the euro fell Monday as the region’s worsening energy crisis added to concerns about a global economy already facing high inflation and a wave of monetary tightening.

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European futures fell 3% and an Asian stock index was in the red amid losses in Japan, China and Hong Kong, where tech stocks slid as traders weighed the risk of U.S. restrictions on stocks. investments. U.S. contracts faltered after the worst week for global stocks since their June slump to bear market lows.

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The dollar was firm as commodity currencies joined in the euro’s decline. Crude surged past $88 a barrel ahead of an OPEC+ meeting on the offer and as investors weighed the latest twists in the energy sector.

Last week, Gazprom PJSC again halted its main European gas pipeline indefinitely after Group of Seven leaders agreed to put in place a price cap on Russian oil as the Kremlin continues its war in Ukraine.

EU ministers will discuss special measures to curb soaring electricity costs, ranging from capping gas prices to suspending trading in electricity derivatives. Germany – the hardest hit by the Nord Stream pipeline cut – unveiled a $65 billion package to protect consumers.

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There is no cash treasury bill trading due to the Labor Day break, which also closes the US stock market. Bonds rose in Australia.

Monetary authorities, including the European Central Bank, are expected to continue raising interest rates this week to fight inflation despite the darkening global economic outlook due to risks including natural gas shortages and restrictions. of Covid in China. A concomitant increase in real yields – seen as the true cost of money for borrowers – acts as a barrier to a variety of risky assets.

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

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Markets also face more uncertainty due to US-China tensions – the Biden administration plans to take steps to curb US investment in Chinese tech companies and allow era import tariffs on goods. Trump to continue while levies are reviewed.

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

In the UK, Conservative Party members are expected to nominate Liz Truss as their leader, paving the way for her to become Prime Minister. His plan to “boost” the economy by cutting taxes is already worrying investors amid double-digit inflation. The British pound weakened against the greenback.

Elsewhere, Bitcoin hovered near the $20,000 level. Gold has changed little.

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What to watch this week:

  • The British Prime Minister will be announced on Monday
  • OPEC+ meeting on supply, Monday
  • Australian rate decision, Tuesday
  • Apple event set to showcase new iPhones and Watches on Wednesday
  • Bank of England Governor Andrew Bailey at the Treasury Committee on Wednesday
  • Fed Regional Economic Activity Beige Book, Wednesday
  • Cleveland Fed President Loretta Mester is scheduled to speak on Wednesday
  • European Central Bank rate decision on Thursday
  • Fed Chairman Jerome Powell speaks at a Cato Institute conference in Washington on Thursday
  • Reserve Bank of Australia Governor Philip Lowe speaks at an event on Thursday
  • China PPI, Overall Funding, Money Supply, New Yuan Lending, Friday
  • Extraordinary meeting of EU energy ministers on the emergency response to electricity markets, Friday

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Some of the major movements in the markets:

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  • S&P 500 futures rose 0.1% at 10:46 a.m. in Tokyo. The S&P 500 fell 1.1%
  • Nasdaq 100 futures were flat. The Nasdaq 100 fell 1.4%
  • Japan’s Topix index lost 0.2%
  • The Australian S&P/ASX 200 index gained 0.2%
  • South Korea’s Kospi index rose 0.2%
  • China’s Shanghai Composite index fell 0.3%
  • Hong Kong’s Hang Seng index loses 1.5%
  • Euro Stoxx 50 futures fell 3.1%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2%
  • The euro fell 0.3% to $0.9920
  • The Japanese yen was at 140.23 to the dollar
  • The offshore yuan fell 0.2% to 6.9289 per dollar

Obligations

  • The yield on 10-year Treasury bills fell six basis points to 3.19% on Friday
  • The Australian 10-year bond yield fell two basis points to 3.63%

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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Mary I. Bruner