Title: European Stocks Sharply Lower; Gas Pipeline, Inflation Worries Weigh

Jul 11, 2022 03:38AM ET

By: AnalysisWatch

European stock markets traded sharply lower on Monday, with investors taking a cautious stance amid energy concerns in the region and ahead of a US inflation report that could point to another significant interest rate hike.

At 03:40 AM ET, Germany's DAX was trading 1.3% lower, France's CAC 40 was down 1.5% and Britain's FTSE 100 was down 0.9%.

Most of last week's positive sentiment was reversed on Monday as investors eagerly await the release of the latest consumer price reports from a number of countries, especially the US.

The French, German and Spanish CPIs are expected to remain at or near record levels, while the US CPI is expected to rise 8.8% year-on-year and 1.1% month-on-month. These figures would represent acceleration from the previous month, with energy costs seen as the main driver.

Combined with the strong non-farm payrolls data released on Friday, this will put further pressure on the Federal Reserve and point to another 75 basis point rate hike likely to impact global growth.

Also weighing on Monday's performance is news that the largest single pipeline carrying Russian gas to Germany has begun its annual maintenance and is expected to cut off gas supply for ten days.

In corporate news, shares in Dansk Bank fell 5.7% after the Danish lender cut its full-year net profit forecast on Sunday, hurt by rapidly rising interest rates and unfavorable financial market conditions.

Oil prices eased slightly on Monday as fresh COVID concerns in Shanghai raised fears of new closures and a drop in demand from the world's biggest crude importer.

While authorities are keen to ensure that any restrictions are as targeted as possible to limit damage to the world's second-largest economy, the news brings back memories of the prolonged closures earlier this year that clogged global supply chains and affected international trade.

At 3:40 AM ET, US crude futures were trading 2.2% lower at $102.50 a barrel, while the Brent contract fell 1.9% to $104.94.

In addition, gold futures fell 0.4% to $1,735.10/oz., while EUR/USD traded 0.6% lower at 1.0121.