Sep 05, 2022 01:54AM ET
By: AnalysisWatch
European stock markets are expected to open sharply lower on Monday as investors worry about economic risks facing the region, including possible energy shortages, slowing growth and soaring inflation.
The DAX futures contract in Germany was down 3.3% at 02:00 GMT, the CAC 40 futures contract in France was down 0.5%, and the FTSE 100 futures contract in the United Kingdom was down 0.1%.
Russia announced over the weekend that one of its main gas supply pipelines to Europe would remain closed indefinitely and cancelled a Saturday deadline to resume gas flow through the Nord Stream pipeline, citing an oil leak in a turbine.
The Nord Stream pipeline was already operating at just 20% of its capacity before the flow was halted last week for maintenance. The move is likely to increase already high gas prices and raise concerns about energy rationing in Europe as winter approaches.
Sharply rising energy prices can only increase inflation, which is already at a record high in the eurozone and fast approaching double digits.
This is putting pressure on the European Central Bank to act, and policymakers are expected to respond with a second sharp interest rate hike on Thursday to tighten conditions before economic conditions deteriorate further.
However, economic data due later in the sector is expected to show that economic activity in the eurozone fell further in August, with the S&P Global Composite PMI dropping from 49.9 to 49.2 points.
Retail sales in the region could rise by 0.4% month-on-month in July, but this represents only a small recovery after a 1.2 cline in the previous month. On a year-on-year basis, July is expected to decline by 0.7%.
There was some good news overnight as China's services sector activity rose more than expected in August, with the Caixin Services Purchasing Managers' Index coming in at 55, higher than the expected 54 points.