Eurozone slips into recession, pushing the euro to a 20-year low

LONDON (Reuters) – A contraction in the euro zone economy for the second month in a row sent the single currency to a 20-year low against the dollar on Tuesday, as rising gas prices added to the misery that pushed Europe into recession.

Flat US stock index futures also gave investors little appetite for risky assets, although oil jumped more than 1% as tight supply returned to focus as Saudi Arabia floated the idea of ​​OPEC+ production cuts. Read more

While the S&P Composite PMI of business activity in Europe wasn’t as bad as feared, analysts said more bleak news for the economy is likely given how gas prices are at record highs ahead of winter. Read more

MSCI World Stock Index (.MIWD00000PUS) It decreased by 0.3%.

Stokes (.stoxx) The European stock index fell 0.4%, after falling for nearly a week. It is now about 11% from its high on January 4th as the war in Ukraine has sent inflation soaring and central bank interest rates to highlight growth.

Standard EU gas prices surged 13% overnight to a record peak, having doubled in just one month to be 14 times higher than the average of the past decade.

Europe was prepared for a new disruption in energy supplies from Russia. Read more

“I can’t expect the Ukraine war to end anytime soon, that will be the catalyst for a market rally. This will continue to put pressure on energy prices, as for the euro, it’s the only way to go down,” Michael said. Hewson, CMC Markets’ major markets.

Stocks are starting to recover on bets that the US Federal Reserve will “pivot” next year away from the path of higher interest rates.

But despite signs of inflation in the US, markets now expect the Fed to remain hawkish when its Chairman Jerome Powell addresses the annual Jackson Hole meeting of global central bankers on Friday.

At last year’s meeting, central bankers mistook investors for inflation to be a temporary storm, but the price hike was higher, longer-lasting and more broad-based, said Monica Devind, president of the Amundi Institute.

Markets are betting the Federal Reserve will raise interest rates by 75 basis points next month, as the European Central Bank and Bank of England are also expected to raise benchmark interest rates.

Defend said that while the company’s earnings showed some resilience, margins will come under pressure later this year.

Devind said the euro, which is trading at $0.9920 to the dollar, is expected to fall further to $0.9600 by December due to the outlook for poorer Europe.

“The United States and the eurozone are on two different tracks,” she said.

The British pound moved off its two-and-a-half year lows against the dollar after the UK’s Purchasing Managers’ Index showed business activity slowing in line with expectations. Read more

S&P 500 and Nasdaq futures settled after Monday’s sharp sell-off on Wall Street. US PMIs are due to be released shortly after the stock market opens.

China UNEASE

Asian stocks fell for the seventh consecutive session on Tuesday after a renewed rise in European energy prices sparked recession fears and pushed bond yields higher, while flipping the euro to a 20-year low.

Concern over the Chinese economy continued to emerge as lower lending rates and talk of a new round of official loans to property developers underscored pressures in the sector.

“Growth in the service sector seems unlikely to accelerate much as long as China’s non-proliferation policies continue; the epidemic-related export boom is nearing its end; and drought-related energy shortages in parts of the country appear set to be ripe for a market economist,” said Oliver Allen, a market economist In Capital Economics: “Near-Term Troubled Industry”.

Chinese blue chips (.CSI300) The yuan fell 0.5%, while the yuan fell to its lowest level in nearly two years.

Nikkei (.N225) It lost 1.2% after a PMI survey showed that factory activity in Japan slowed to a 19-month low in August. Read more

Ten-year bond yields were trading at 3.01%, nearly 50 basis points higher than their lows in early August.

The dollar’s rally and yields were a drag on gold, which was hovering at $1,736 an ounce after hitting a three-week low overnight.

Oil prices rose with Saudi Arabia warning that the OPEC + producer alliance may cut production.

Brent crude rose 1.5 percent to $97.92, while US crude rose 1.75 percent to $91.96 a barrel.

(Reporting by Hugh Jones and Wayne Cole) Editing by Jacqueline Wong, Mike Harrison and Chizu Nomiyama

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