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European indexes fell sharply and the euro touched a new 20-year low after Russia extended a halt to natural-gas flows through a major pipeline, sending energy prices soaring.
In early trading Monday, the pan-continental Stoxx Europe 600 index fell 1.8%, while Germany’s DAX index lost 3.2%. The U.K.’s FTSE 100 was down 1.2%.
The euro edged slightly lower to $0.9927 after setting a new 20-year low earlier in the day. The British pound was flat at $1.1491, recovering after falling to a multidecade low earlier in the session.
U.S. stock futures wavered, with markets closed for the Labor Day holiday. Contracts linked to the S&P 500 and Dow Jones Industrial Average rose 0.1%. Futures tied to the tech-heavy Nasdaq-100 fell 0.1%. U.S. stocks fell Friday after strong labor-market data bolstered expectations that the Federal Reserve will continue raising interest rates at an aggressive clip.
Russia’s move Friday to extend a halt to flows through the Nord Stream pipeline to Germany is set to exacerbate energy pressures that are already straining households and businesses across Europe.
Natural-gas futures in northwest Europe, which reflect the cost of fuel in the wholesale market, jumped more than 30% early Monday. They remain below the all-time high recorded in late August.
“It’s inevitable now that Europe is going to be in a recession,” said
Craig Erlam,
senior market analyst at Oanda. “It’s just a case of how much support governments are going to offer against that backdrop and how inflationary that’s going to be.”
Germany over the weekend unveiled a support package worth 65 billion euros, equivalent to $64.7 billion, that includes a price cap on electricity.
Natural-gas futures in northwest Europe, which reflect the cost of fuel in the wholesale market, jumped more than 30% early Monday.
Photo:
Stefan Sauer/Associated Press
The U.K. is expected to announce a new Prime Minister Monday, with Foreign Minister
Liz Truss
seen as the likely winner of the Conservative Party leadership race to replace
Ms. Truss has pledged support for households, but the details are still being worked out.
Prices for Brent crude, the global benchmark, rose 2.7% to $95.56 ahead of a meeting of OPEC+ oil producers. The Wall Street Journal reported that Russia doesn’t support an oil-production cut at this time, and it is likely OPEC+ will keep its output steady.
Asian stock indexes fell after an extension of lockdowns in China, where Covid-19 case numbers remaining elevated. Authorities have tightened measures to contain Covid-19 in the large cities of Shenzhen and Chengdu. After ordering 21 million residents of Chengdu to remain indoors last week, the local government has now extended a lockdown covering most of the city until Wednesday.
Hong Kong’s stock benchmark fell 1.2%. BYD dropped 5.9% after an exchange filing Friday showed
Warren Buffett’s Berkshire Hathaway
has further pared its stake in the electric car maker. Tech giant Tencent, Chinese auto maker Geely and e-commerce company
were among the other stocks that dragged down the Hang Seng Index.
China’s CSI 300 index of the largest stocks listed in Shanghai or Shenzhen fell 0.2%. Japan’s Nikkei 225 edged 0.1% lower, and Korea’s Kospi index declined 0.2%.
China’s currency, the yuan, broke through a new two-year low against the U.S. dollar. The offshore yuan traded as weak as 6.9551 yuan per dollar, its lowest level since August 2020, before recouping some losses. Economists and analysts say recent yuan weakness partly reflects the difference in interest rates between China and the U.S.
—Joe Wallace contributed to this article.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com and Dave Sebastian at dave.sebastian@wsj.com
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