On Monday, European shares declined, as economy-sensitive stocks brought them lower. This was because of new COVID-19 cases in China and fresh worries about the energy supply crisis took their toll on risk appetite and fueled worries about an economic recession.
The biggest single pipeline called Nord Stream 1 that transports gas from Russia to Germany started its annual maintenance on Monday, which means there will be no flows for the next 10 days. However, companies, markets, and governments were all concerned that the war in Ukraine might see this shutdown extend.
Stock index falls
There was a 0.5% loss in the continent-wide STOXX 600 index, which brought an end to its winning streak of three days after the benchmark index had recorded its best weekly performance on Friday. There was a 2.8% drop in automobiles exposed to China, which was the highest amongst European sectors.
It also resulted in a 1.4% loss for the German DAX index. There was a fall of 1.9% recorded in miners, and iron ore and metal prices declined because of worries that there would be more curbs in Shanghai due to the rising number of cases.
Market analysts said that investors were concerned about the impact on all industries across the board. They added that if rationing was part of the emergency plans that the government may implement, then it would certainly take a toll on economies that depend on Russian exports.
ECB under pressure
The prices of gas in Europe will remain higher for longer because of the halt in supply from the Nord Steam I pipeline. This means that there would be greater pressure on the European Central Bank (ECB) which is scheduled to hike its interest rate for the first time later this month in more than a decade.
The first company to take a hit from the fall in supplies from Russia was Uniper, as it shed a whopping 14.4%. This was because of a dispute between Finland and Germany over the cost of the gas importer’s rescue.
The last few weeks have been quite tough on markets because of recession concerns and investor worries are also heightened because the euro is close to parity with the dollar, which means earnings will take a hit.
On Monday, finance ministers in the Eurozone said that their current priority was the fight against raging inflation, even though the bloc is recording a slowdown in economic growth. The European Commission is set to report a deterioration in the economy’s outlook.
On Wednesday, US consumer price data is set for release and investors are keeping an eye on it for further clues about the rate hike plan of the US Federal Reserve later this month. Thursday onwards, the earnings season is also set to begin and this would indicate how corporate earnings are doing amidst tightening financial conditions and soaring inflation.
Euro bond yields were down, as there was a 2.3% dip in the gauge for eurozone lenders.