Europe midday: Stocks off intra-day lows as gas futures reverse course and retreat

By Alexander Bueso

Stocks across the Continent came off their intraday lows as a bounce in natural gas futures evaporated, having earlier fallen following the release of a stronger-than-expected report on euro area CPI.
Craig Erlam, senior market analyst at Oanda, said: “stock markets in Europe turned lower again on Wednesday while US futures are more mixed, similar to what we saw in Asia overnight.

“Conditions remain choppy in the aftermath of Jackson Hole last week.

There’s clearly a lack of conviction in the markets following a lot of hawkish central bank commentary in recent days.”

“As at 1208 BST, the pan-European Stoxx 600 was slipping by 0.46% to 417.87, alongside a 0.31% dip for the German Dax to 12,918.89.

Notably, Dutch TTF natural gas futures had reversed course to trade down by 19.5% to €245.5/MWh.

The decline in futures was despite Gazprom taking the Norsdtream 1 gas pipeline offline for three days of scheduled maintenance on Wednesday.

Traders were also eyeing a meeting an emergency meeting of the European Union’s energy ministers scheduled for 8 September were measures to rein in energy prices – at least in the near-term – might be decided upon.

Euro/dollar meanwhile was off just a tad, drifting lower by 0.22% to 0.9993, but also off its lows.

The annual rate of increase in the headline rate of euro area consumer prices accelerated from 8.9% in July to 9.1% for August (consensus: 9.0%).

But the real news was a pick up in core CPI from 4.0% to 4.3% (consensus: 4.0%), on the back of rising prices for non-energy industrial goods and services.

In other economic news, Germany’s rate of unemployment was reported at up to 5.5% in the month of August, versus 5.4% in July, alongside a 28,000 rise in jobless claims, as expected.

“Overall, we see core inflation ending the year fractionally under 4%, which will keep the ECB’s feet to the fire,” Pantheon Macroeconomics’s chief economists, Claus Vistesen, said in the wake of the report.

“We now think the central bank will raise its deposit and refinancing rates by 50bp in October and December, respectively.”

According to analyst at Saxo Bank, markets were pricing in 65 basis points of tightening for the European Central Bank’s 8 September policy meeting.

Household consumption in France fell at a 0.8% month-on-month pace in July when services are excluded (consensus: -0.3%).

Still ahead, at 1315 BST consultancy ADP was scheduled to publish its private sector payrolls report for August, which often led to a rise in intra-day market volatility.

Worth noting, Wednesday’s release would see the introduction of a new methodology by ADP.

Two hours later, Market News International would release its factory sector Purchasing Managers Index covering the same month.

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