European equity futures dropped, and the euro and pound sterling fell today, Monday as the energy crisis has been escalating adding pressure to an already stressed global economy troubled by soaring inflation and the tightening of monetary policies.
At the same time, the U.S. dollar was firm as commodity currencies also fell. The price of oil rose as OPEC+ is to have a meeting to discuss supply. Cash Treasuries and U.S. stocks are closed for a public holiday, today, Monday.
Energy Crisis in Europe
Russia’s Gazprom gas supply pipeline will remain shut indefinitely as the company is citing an oil leak in a turbine. The move comes after the Group of Seven leaders decided to set a price cap on Russian oil as Russia continues its war in Ukraine.
The cut-off could drive natural gas prices to new highs sparking fears of energy rationing in Europe during winter. Price increases could only worsen record-high inflation which is close to reaching double digits in the Eurozone countries. The energy crisis is also adding pressure on the European Central Bank to act. It is expected that the institution will increase interest rates for the second time on Thursday in an attempt to tighten its policy before economic conditions further worsen.
Chinese and Hong Kong shares plummeted today Monday due to concerns over new Covid-19 lockdowns in China. Trying to curb a Covid outbreak, Beijing extended lockdowns in Chengdu and commanded more mass testing. The measures come as part of China’s zero-Covid policy. The government refusing to shift its approach has had negative effects on the Chinese economy for this year.
At the same time, Asian markets dropped after the U.S. NFP figure came in stronger than expected and could possibly lead to further steep interest rate hikes by the Federal Reserve.
Euro falls below 99 cents
The euro dropped to $0.9880 during the Asian session marking the first time it traded below 99 cents for the first time in almost 20 years. The slid comes after Russia’s indefinite halt of gas supply to Europe which stoked worries about energy shortages, soaring prices and a hit in economic growth.
The U.S. dollar hits 20 year high
In the meantime, the U.S. dollar index hit a fresh 20-year high, climbing to 110.25. The U.S. dollar is measured against a six-currency basket with the euro being the most heavily weighted.
The British pound also dropped against the U.S. dollar on concerns of soaring energy costs. In the UK, Liz Truss is expected to become prime minister. Her plan to boost the economy by cutting taxes during double digit inflation is already causing worry in investors.
Oil Rose as OPEC+ is slated to meet
Oil prices went up today, Monday and added on gains as investors are watching the next OPEC+ meeting scheduled to take place today, closely. They expect the Organization of the Petroleum Exporting Countries (OPEC) and its allies to keep or reduce output to support prices.
What to Watch out for this Week:
UK prime minister announcement
OPEC+ meeting on supply
Australia rate decision
Bank of England Governor at Treasury Committee
Fed’s Beige Book
Cleveland Fed President’s speech
European Central Bank rate decision
Fed Chair’s speech
Reserve Bank of Australia Governor’s speech
China aggregate financing
China money supply
China new yuan loans
E.U. energy ministers meeting