Recession fears bring down oil, euro and stock markets

Recession fears drive down oil, euro and stock markets< /p> UPDATE DAY

Fear of a “coming recession” was back on Tuesday in financial markets where stocks, oil, the euro and the pound tumbled, with rising gas prices amplifying investor worries.

Oil prices, very sensitive to the outlook for economic growth, fell by nearly 10%, the euro was even at its lowest level for nearly 20 years against the greenback, trading at 1.0251 dollars (-1 ,63%). 

European stock markets ended the session down sharply: Paris fell 2.68%, Frankfurt lost 2.91%, Milan 2.99%, they all three find themselves at a level not seen since the spring of 2021. London lost 2.86%.

The trend “started in European markets and dragged American markets down,” notes Alexandre Baradez, analyst at IG France. In New York, the Dow Jones yielded 1.90%, the Nasdaq 0.50% and S&P 500 1.64% around 4:05 p.m. GMT.

The pound also fell 1.64% against the dollar, safe haven par excellence.

The sharp rise in gas prices is of particular concern to investors. In just one week, Europe's benchmark natural gas contract soared 27% and stood at 164 euros per megawatt hour on Tuesday. 

Since the beginning of the year, it has soared by nearly 140%, whereas it was evolving well below 100 euros per megawatt hour before the Russian invasion of Ukraine at the end of February.

< p>“This raises questions about the impact on the European economy and especially the risks for Germany, which is on the front line” of the drop in Russian gas deliveries, comments Alexandre Baradez.

“Sharp increases in gas and electricity prices pose a significant risk that the European Union economy will enter recession sooner than expected,” said Trevor Sikorski, an analyst at Energy Aspects, in a statement. report.

In Norway, a country that pledged to sustainably increase gas supplies to the EU in June, a strike threatens to cut exports by almost 60% from Saturday.< /p>

Another reason for concern, the growth of economic activity in the euro zone slowed sharply in June in the private sector, at its lowest in 16 months, according to the composite PMI index from S&P Global.

An indication “that growth is rapidly running out of steam”, according to analyst Neil Wilson. “A recession seems inevitable, although there are some signs that inflation may have peaked in April, according to these figures,” he adds.

Assets deemed risky are falling found themselves penalized, like bitcoin which lost 1.32% to 19,500 dollars. 

Conversely, interest rates on European government bonds fell sharply on the bond market due to these concerns and investor preference for investments deemed safer.  

The ten-year German debt rate, which is a reference in Europe, lost 15 basis points and stood at 1.17% around 4:00 p.m. GMT. 

< h2>Raw materials go up in smoke

The price of a barrel of Brent for delivery in September tumbled 8.61% to 103.78 dollars, while that of American WTI for August maturity fell below the 100 dollar mark, down 7.99% 4:00 p.m. GMT.

“All the components of the fears of recession are activated, with oil and copper falling,” notes Alexandre Baradez. 

Heavily used in industry, particularly for the manufacture of electrical circuits, copper is indeed known to reflect the state of health of the world economy.

For the first time in 17 months, copper was trading below the 8,000 dollar mark per tonne, down 20% since the start of the year. On Tuesday, it reached 7,627.00 dollars per ton.

Oil stocks (Shell -8.49%, BP -7.01%, TotalEnergies -6.42%) and mining stocks (Glencore -7 .99%, Anglo American -8.27%, Antofagasta -7.90%) fell. 

In Frankfurt, the Uniper share (-9.45%) was penalized by the legislative changes presented by the German government which would allow the State to enter the capital of companies in the energy sector.