Energy News Today

European shares edge higher as oil and natural gas surge

European shares made small gains on Wednesday, as energy prices surged in response to Russia intensifying its attacks on Ukraine’s biggest cities but traders bet on central banks maintaining loose monetary policy.

The regional Stoxx Europe 600 added 0.1 per cent, as investors balanced the potential for economic fallout from the crisis with that of central banks to reverse previous signals that they were set to withdraw pandemic-era support. Germany’s Xetra Dax added 0.3 per cent and France’s CAC 40 rose 0.4 per cent.

Futures contracts tracking Wall Street’s S&P 500 index rose 0.6 per cent. Those on the technology-heavy Nasdaq 100 gained 0.7 per cent, as traders saw gains for big tech stocks whose earnings prospects are perceived as relatively insulated from short-term economic trends.

Brent crude, the international benchmark, climbed 4.2 per cent to $109.34 a barrel after US president Joe Biden declared Russia as being isolated from the world and hinted at more economic sanctions ahead.

Meanwhile, European natural gas prices hit an all-time high. Futures linked to TTF, Europe’s wholesale natural gas price, rose more than 50 per cent to €185 per megawatt hour before trimming their gains to trade at €159.

Sanctions imposed on Russia by western countries have so far sought to avoid the energy sector but have nonetheless stoked volatility in global markets on concerns over disruptions to supply.

“Brent crude is the biggest fear factor for equity markets,” said Maarten Geerdink, head of European equities at Dutch investment house NN Partners. “If it goes ballistic and moves towards $150 or more a barrel, then [economic] growth really gets hammered.”

But Ross Mayfield, investment strategist at Baird, said: “There’s a risk-off sentiment from the war but that also may put the Federal Reserve and other central banks on a less aggressive tightening path.”

The yield on Germany’s benchmark 10-year Bund rose 0.03 percentage points to minus 0.04 per cent. This followed a powerful rally for US, UK and eurozone government bonds on Tuesday as derivatives markets began pricing in a much slower pace of monetary tightening by central banks, which had been expected to exit pandemic-era monetary support with a series of interest rate rises.

The 10-year US Treasury yield rose 0.04 percentage points to 1.75 per cent. This debt yield, which underpins borrowing costs worldwide, dropped almost 0.1 percentage point on Tuesday and is near levels last seen in January before Fed chair Jay Powell prepared financial markets for a string of aggressive rate increases.

The latest gains for oil, which left Brent about 13 per cent higher since President Vladimir Putin launched his invasion of Ukraine, came as Russia stepped up the bombardment of its neighbour’s biggest cities. Prices rose despite the US and 30 other countries saying they would release 60mn barrels from their strategic reserves.

Biden has come under mounting pressure to ban Russian oil imports, with Republicans and Democrats calling on the US president to cut off energy ties with the Kremlin. In his State of the Union speech on Tuesday, Biden voiced support for punitive measures against Russia but stressed that getting prices under control was his “highest priority”.

Russia’s central bank said the Moscow stock exchange, which did not open for trading on Monday, would remain closed on Wednesday.

Read More: European shares edge higher as oil and natural gas surge

2022-03-02 04:18:05

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