European stock markets fall on growing recession fears | Stock markets

Growing worries about a European recession hit stock markets on Tuesday as the euro slumped to its lowest level in two decades and the pound fell to its lowest since the start of the pandemic.

Shares fell in London and across Europe as a surge in natural gas prices intensified pressure on the European economy.

The single currency fell 1.5% to $1.026 against the US dollar, the lowest since late 2002. The pound fell below $1.20 to hit a two-year low of $1.193, the weakest point against the dollar since March 2020.

Oil also fell as recession fears mounted, with Brent crude plunging 6% to below $107 a barrel, the lowest since mid-May.

Mining stocks, oil producers and airlines were among the big losers in London, where the FTSE 100 stock index fell 182 points or 2.5% in afternoon trading. Anglo American and Glencore lost 7%, while BP and Shell fell 6%.

The German DAX index and the French CAC also fell by around 2.4%.

Investors fear that rate hikes by central banks desperate to tackle soaring inflation could push economies into recession. A further disruption in Russian energy supplies would also trigger a European slowdown, analysts have warned.

“Everyone is looking for an inflation spike, but we’re probably at the point where it’s most dangerous because it’s getting sticky,” said Markets.com’s Neil Wilson.

“High and sticky inflation is the worst combination because it means expectations have not been anchored. It will only cause the Federal Reserve and other central banks to inflict more pain.

A spike in natural gas prices on Tuesday, after a strike forced Norway’s Equinor to close three oil and gas fields, added to concerns about the economic outlook.

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“The panic returned on Tuesday as another spike in natural gas prices upset the precarious calm,” said Raffi Boyadjian, chief investment analyst at XM.

“Fears that Europe’s energy crisis is about to escalate have sunk the euro, which fell to its lowest since late 2002, crashing below the $1.03 level. Besides the threat that Russia will cut gas supplies to Germany and other European importers, a strike at several gas fields in Norway is fueling supply problems,” Boyadjian added.

A survey of purchasing managers showed business growth in the euro zone slowed to its lowest level in 16 months as manufacturing output fell and the cost of living crisis hit spending Services.

Shares fell in New York as traders returned to their offices after the Independence Day break. The S&P 500 index fell 2% in early trading, having already fallen 20% in the first half of this year.

Yields, or interest rates, on UK, US and eurozone government bonds also fell on Tuesday as worries about economic growth weighed on risk appetite. and increased demand for safer assets.