European stock markets closed in the red on Friday as storm Eunice hit Britain, driving down electricity prices and boosting wind turbine output to some of the highest levels on record.
Domestic day ahead prices fell 11% to £140 ($191) per megawatt hour. German prices have fallen 66% to their lowest level this year, with wind output from the country’s wind farms expected to double by Saturday morning, according to Bloomberg estimates.
the office met issued a rare second red weather warning on Friday to cover London, the south east and east of England. A red warning – meaning there is life-threatening danger from flying debris – is also in place for parts of south-west England and south Wales. All trains in Wales are suspended and hundreds of schools will be closed, while the army is on standby.
But strong winds battering the UK and parts of Europe will bring much-needed relief to tight energy markets, which rely heavily on coal and gas amid supply shortages.
Wind in the UK now accounts for 30% of all power generation thanks to Storm Eunice which brought record gusts of up to 122 miles per hour – the biggest gust ever recorded in England.
The FTSE 100 (^FTSE) closed 0.3% lower as new data showed UK retail sales rose faster than expected in January. The figures of the Office of National Statistics (ONS) suggest that inflation has yet to have a massive impact on consumer spending, with the volume of goods sold online and in-store rising by 1.9% and providing a much-needed rebound from the shock of 4% induced by Omicron in December.
But experts expect consumers to tighten their purse strings in the coming months, as inflation is expected to peak at 7%, and households will face higher energy bills and energy hikes. taxes in April.
“Retailers will be acutely aware that the cost-of-living squeeze could cause consumers to watch their spending more closely in the weeks and months to come, which will impact commerce,” said Paul Martin, head of the UK retail at KPMG.
“As with consumers, retailers are also facing inflationary pressures. Businesses have tough decisions to make on how to absorb or pass them on without losing the customer base. »
The growth came despite UK consumer price inflation hitting a new 30-year high of 5.5% earlier this week.
Elsewhere in Europe, the French CAC (^FCHI) edged down more than 0.3% and the DAX (^GDAXI) fell 1.5% in Germany.
It comes after figures showed eurozone output slumped at the end of 2021 as rising COVID infections hit the economy. Production fell in the construction sector by 4% month on month in the euro area and by 3.1% in the enlarged EU.
Read more: UK consumer prices hit new 30-year high as inflation hits 5.5%
Major U.S. benchmarks opened mixed on Friday as traders kept a close eye on the latest developments in the Ukraine crisis, after U.S. President Joe Biden warned on Thursday that Russia was set to invade Ukraine from here”several days”.
Analysts say risk assets have been sensitive to Ukraine-Russia headlines over the past 24 hours as fears of a military escalation resurfaced. But, despite recent market volatility, it’s “important to remember that we are still in an environment of robust economic growth and earnings,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
Haefele added that the Swiss bank expects “stock markets to rise for the rest of the year.”
However, investor fears over a standoff in Ukraine may be eased after the Kremlin and the United States agreed to talks next week. US Secretary of State Anthony Blinken has accepted an invitation from Russian Foreign Minister Sergey Lavrov to meet next week, on the condition that there are no more Russian intrusions into Ukraine.
The tech-rich Nasdaq (^IXIC) was down more than 1% at the close in London, while Wall Street’s blue-chip S&P 500 (^GSPC) fell 21.25 points, or more than 0.5%, to 4,359.01 .
The Dow Jones (^DJI) fell 0.3% after suffering its biggest one-day loss in 2022 at the close on Thursday, losing more than 600 points, or 1.8%, to 34,312.03.
“It is becoming increasingly clear that the United States seems to think a Russian invasion is only a matter of time, and whether it happens this week or in a few days, American officials want it be clear that if and when it happens, Russia will not be able to hide behind a ‘false flag’ event to justify it,” said Michael Hewson, chief market analyst at CMC Markets.
Read more: National Grid share price rises as Macquarie targets £7.3bn stake in gas unit
Natural gas (NG=F) prices also reversed, falling 0.8% pending further negotiations between countries, easing worries about supply shortages.
Oil prices and government bond yields also fell. The yield on 10-year U.S. Treasury bonds (^TNX) fell to 1.97% on Thursday from 2.04% on Wednesday.
The oil rally appears to be running out of steam as traders assess lingering tensions between Russia and Ukraine over the possibility of an Iranian nuclear deal after hitting seven-year highs earlier in the week.
Overseas, the pancontinental Stoxx Europe 600 index (^STOXX) fell 0.7%.
Asian markets also fell on Wall Street’s sharp decline and geopolitical tensions, but hopes for talks between nations have softened the blow as the prospect of war dims.
The Shanghai Composite (000001.SS) rose 0.7%. The Hang Seng (^HSI) fell 1.9% while the Nikkei (^N225) fell more than 0.4% in Japan.