Europe: Shares slip to near 1-month low on gas price surge, recession fears

EUROPEAN shares slipped on Tuesday, extending their losing streak for a third session as investors fretted about soaring energy prices and a weak economic outlook after data showed business activity in the region contracted this month.

The pan-European Stoxx 600 slipped 0.4 per cent, dropping to its lowest in almost a month. Euro zone business activity contracted for a second consecutive month in August as the cost-of-living crisis forced consumers to cut spending while supply constraints hurt manufacturers, a survey showed.

In Germany, the downturn deepened in August, as companies saw demand weaken due to high inflation, rising interest rates and economic uncertainty.

Separately, the manufacturing index rose to 49.8 in August from 49.3 the previous month, beating analyst forecasts of 48.2.

Germany’s DAX dipped 0.3 per cent after the data.

“It’s been another day of poor economic data for European markets, with the latest flash manufacturing PMI numbers falling into contraction territory for Germany, France and the UK.” said Michael Hewson, chief market analyst at CMC Markets.

Still, Hewson noted that even though economic data has been poor, the reaction of markets has been slightly more ambivalent.

Autos and banks rose 1.1 per cent and 0.3 per cent each, while energy led gains, rising 3.5 per cent as crude prices rose on concerns over tight supply.

Benchmark gas prices in the European Union surged 13 per cent overnight to a record peak, having doubled in just a month to reach 14 times the average of the past decade.

SEE ALSO

Europe: Stocks hits lowest in nearly a month on looming energy crisis

Russia will halt gas supplies to Europe via the Nord Stream 1 pipeline for three days at the end of the month.

Investors are concerned about the uncertainty ahead for European markets, as it is feared the energy crunch could worsen.

Market nervousness is also set to persist ahead of the Jackson Hole meeting of global central bankers on Friday, analysts say, as investors await US Federal Reserve Chair Jerome Powell’s hints on the path ahead for monetary policy in the world’s largest economy.

Among stocks, German utility Uniper SE rose 4.0 per cent after saying it would start producing electricity for the market at its Heyden 4 hard coal-fired power plant as a three-day halt in Russia’s gas supplies to Europe may cause disruptions to power supply. REUTERS