Equities calm down, the euro crushed by the energy crisis


A man walks under an electronic screen showing Japan’s Nikkei stock price index at a conference room in Tokyo, Japan June 14, 2022. REUTERS/Issei Kato

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  • Euro close to 20-year low as Russia closes gas pipeline
  • EUROSTOXX futures slide, S&P 500 futures stagnate
  • Oil prices rebound as gas climbs, OPEC+ meets

SYDNEY, Sept 5 (Reuters) – European stock futures fell on Monday as the euro fell again after Russia closed a major gas pipeline to Europe, leading some governments to announce emergency measures to ease the pain of soaring energy prices.

The euro fell 0.3% to $0.9918 and looked likely to test its recent 20-year low of $0.99005 as markets priced in more risk of a European recession. Read more

EUROSTOXX 50 futures slid 3.0% and FTSE futures 1.1%.

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Germany announced plans to spend 65 billion euros ($64.7 billion) to protect customers and businesses from rising costs, while Finland and Sweden offered liquidity guarantees to maintain open electricity companies. Read more

Oil prices jumped along with the entire energy complex as the holidays in US markets created unfavorable trading conditions. News of more coronavirus lockdowns in China only added to the nervous mood, with blue tokens (.CSI300) down 0.6%. Read more

MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) fell 0.4%, and the Japanese Nikkei (.N225) lost 0.2%.

Wall Street fared slightly better after already falling late on Friday, with S&P 500 futures up a modest 0.2% and Nasdaq futures up 0.1%.

The energy crisis is an additional complication for the European Central Bank (ECB), which is meeting this week to determine how far to raise interest rates. Read more

“Europe faces a dire energy outlook, with many anecdotes of companies cutting production,” said Tapas Strickland, head of market economics at NAB.

“The ECB will no doubt decide to raise rates this week,” he added. “Markets are close to fully pricing in a 75bp hike after many ECB officials said they were leaning in that direction, although there is still likely some debate around 50 vs 75 . .”

EURO, STERLING FIGHT

Central banks in Canada and Australia are also expected to raise interest rates this week, while Federal Reserve Chairman Jerome Powell and several other policymakers will make appearances and likely sound hawkish on inflation.

While the August US jobs report showed welcome signs of a slowdown in the labor market, investors are still leaning towards a 75 basis point hike from the Fed this month .

The two-year US Treasury yield fell nearly 12 basis points on Friday and futures were trading flat on Monday amid general risk aversion.

The move to safety once again benefited the US dollar, which hit a new two-decade high on a basket of major currencies at 110.040.

The dollar was holding at 140.20 yen, just below Friday’s 24-year high of 140.80.

The pound was struggling at $1.1485, having plunged as low as $1.1458 and levels last seen in March 2020 at the start of the pandemic.

“We now expect EUR/USD and GBP/USD rates to hit $0.90 and $1.05 respectively next year as the economic slowdown and terms of trade shock hit the region are taking their toll,” said Jonas Goltermann, senior economist at Capital Economics.

British Foreign Secretary Liz Truss said on Sunday she would take immediate action in her first week in office to tackle rising energy bills and increase energy supplies if it were, as expected , appointed Prime Minister on Monday. Read more

The strong dollar kept gold at $1,710 an ounce.

Oil prices were supported by expectations that gas prices would jump in Europe later in the day.

“Ultimately, Germany would have to reduce its natural gas consumption by 15% to prevent gas storage facilities from emptying,” ANZ analysts said. “Gas rationing seems very likely, as even at 95% full the storage would only last 2.5 months.”

OPEC+ meets on Monday and is expected to keep oil production quotas unchanged for October, although some sources are not ruling out a small production cut to support prices which have fallen on fears of an economic slowdown. Read more

Brent rose $1.73 to $94.75, while U.S. crude rose $1.63 to $88.50 a barrel.

(Corrects 20-year low of euro against dollar at $0.99005, not $0.90005, in second paragraph)

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Reporting by Wayne Cole; Editing by Shri Navaratnam

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