Europe midday: Stocks slide as energy crisis worsens
European stocks were firmly in the red by midday on Monday, while the euro fell to a 20-year low against the dollar as the energy crisis intensified.
The benchmark Stoxx 600 index was down 1.2%, while Germany’s Dax and France’s CAC 40 were 2.4% and 1.7% lower, respectively. At the same time, the euro was trading below parity with the dollar for the first time since 2002, having dropped to $0.988, after Russia indefinitely suspended gas flows through the Nord Stream 1 pipeline to Germany, sending gas prices surging.
Gazprom said on Friday that the decision not to resume gas supply was due to an oil leak detected at the last compressor unit still in operation at the Portovaya compressor station. It said the repairs could only be carried out "in conditions of a specialised repair shop".
Oanda analyst Craig Erlam said: "The decision conveniently came hours after the G7 agreed to an oil price cap and as countries announced they're ahead of schedule in filling gas reserves. Many would argue it was only a matter of time until the decision was taken, with Europe having been squeezed over a number of months for one reason or another.
"There have been reports that Gazprom could increase deliveries via Ukraine as a result of the shutdown but it's not clear whether this would be enough to offset the loss of Nord Stream 1. And considering Siemens has claimed that such a leak would not ordinarily affect the operation of a turbine and is easily fixed, you have to wonder whether Russia would actually take that decision. A painful winter lies ahead."
On the macro front, a survey out earlier showed eurozone business activity contracted again in August, with the S&P/Global composite purchasing managers’ index down to 48.9 from 49.9 in July, below consensus expectations and the initial estimate of 49.2.
The PMI for the services sector declined to 49.8 from 51.2, coming in below the preliminary estimate of 50.2 and the 50.0 mark that separates contraction from expansion.
Separates figures from Eurostat showed that retail sales rose 0.3% on the month in July following a revised 1% drop the month before, coming in a touch below consensus expectations for 0.4% growth. On the year, sales were down 0.9% following a revised 3.2% decline in June, and versus expectations for a 0.7% fall.
Finally, the latest Sentix survey from the European Commission revealed that economic sentiment deteriorated more than expected in September amid worries about a recession. The EC’s economic sentiment indicator for the euro area fell to a 28-month low of -31.8 from -25.2 in August, coming in below expectations for a reading of -27.5.
In equity markets, German utilities Uniper and RWE fell 10% and 2.5%, respectively.
In UK markets, Countryside Partnerships rallied after agreeing to be bought by housebuilder Vistry in a £1.25bn deal.