Shares dropped in Europe and Asia on Monday while oil prices surged more than $3 a barrel amid dire warnings over energy shortages in Europe if Russia cuts off gas supplies.
Germany’s DAX fell 1% to 11,998.26 while the CAC 40 in Paris shed 1.2% to 5,690.88. Britain’s FTSE 100 lost 0.8% to 3,305.79. On Wall Street, the future for the S&P 500 was up 0.2% while the contract for the Dow industrials gained 0.4%.
In its quarterly gas report, the Paris-based International Energy Agency said people will have to save at least 13% over the winter if Russia cuts off the last trickle of gas that’s flowing to Europe.
Europe faces “unprecedented risks” to its natural gas supplies this winter after Russia cut off most pipeline shipments and could wind up competing with Asia for already scarce and expensive liquid gas that comes by ship, the IEA said.
Reports that major oil producers plan further production cuts were also exerting upward pressure on energy prices.
U.S. benchmark crude oil gained $3.18 to $82.67 per barrel in electronic trading on the New York Mercantile Exchange. It lost $1.74 to $79.49 per barrel on Friday.
Brent crude oil, the standard for pricing international oil, rose $3.29 to $88.43 per barrel.
OPEC and allied oil-producing countries, including Russia, made a small trim in their supplies to the global economy a month ago, underlining their unhappiness as recession fears help drive down crude prices.
In Asian trading, Japan's Nikkei 225 index gained 1.1% to 26,215.79 after a Bank of Japan quarterly survey showed sentiment among manufacturers has darkened, reflecting rising costs, the weakening yen and lingering pandemic-related restrictions.
The headline measure for the “tankan,” measuring sentiment among large manufacturers, was plus 8, down from plus 9 the previous quarter. The tankan measures corporate sentiment by subtracting the number of companies saying business conditions are negative from those responding they are positive.
“Today’s Tankan survey suggests that while the services sector is benefitting from the subsiding virus wave, the outlook for the manufacturing sector continues to worsen," said a report from Capital Economics. It noted it was the third consecutive decline in sentiment for the world's third largest economy.
The BOJ has kept interest rates below zero in a longstanding effort to encourage inflation and keep deflation at bay as the country ages and its population shrinks. That has kept the value of the yen weak relative to the U.S. dollar, which has been strengthening as the Federal Reserve raises rates to combat decades-high inflation.
The dollar was trading at 145.15 yen early Monday, up from 144.68 yen late Friday. That raised speculation that the central bank might once again intervene to prevent the yen from weakening further. The euro was at 97.98 cents, up from 97.96 cents.
The stunning and swift rise of the U.S. dollar against other currencies, meanwhile, raises the risk of creating so much stress that something cracks somewhere in global markets.
Elsewhere in Asia, Hong Kong's Hang Seng index fell 0.8% to 17,079.51. Australia's S&P/ASX 200 slipped 0.3% to 6,456.90. Taiwan's Taiex lost 0.9% and Bangkok's SET declined 1.8%.
Wall Street closed out a miserable September on Friday with the S&P 500′s worst monthly skid since the coronavirus pandemic crashed global markets. It’s now at its lowest level since November 2020 and is down by more than a quarter since the start of the year.
The Fed has been at the forefront of the global campaign to slow economic growth and hurt job markets just enough to undercut inflation but not so much that it causes a recession. On Friday, the Fed’s preferred measure of inflation showed it was worse last month than economists expected. That should keep the Fed on track to keep hiking rates and hold them at high levels a while, raising the risk of it going too far and causing a downturn.
The S&P 500 fell 1.5% on Friday while the Dow Jones Industrial Average dropped 1.7%. The Nasdaq composite slid 1.5% and the Russell 2000 lost 0.6%.
Other worries hang over global markets, including Russia's invasion of Ukraine. A U.K. government plan to cut taxes sent bond markets spinning recently on fears it could make inflation even worse. Bond markets calmed a bit only after the Bank of England pledged last week to buy however many U.K. government bonds are needed to bring yields back down.
© Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.