European inventory markets tumble on rising fears of recession

Rising worries a couple of European recession hit inventory markets on Tuesday because the euro slumped to a two-decade low and the pound fell to its lowest because the begin of the pandemic.

Shares tumbled in London and throughout Europe as a leap in pure fuel costs intensified the pressure on the European financial system.

The only foreign money fell by 1.5% to $1.025 towards the US greenback, the bottom since late 2002. The pound dropped under the $1.20 mark to a two-year low of $1.19, the weakest level towards the greenback since March 2020.

Oil additionally tumbled to its lowest since mid-Could as recession fears mounted, with Brent crude falling by greater than 9% to under $103 a barrel, and US crude dropping via the $100-a-barrel mark.

Mining shares, oil producers and airways have been among the many large fallers in London, the place the FTSE 100 share index dropped by 2.8%, or 207 factors, to 7025. North Sea oil producer Harbour Vitality slumped 9.6%, whereas Shell fell 8.5% and Anglo American and Glencore each misplaced 8%.

Germany’s DAX index misplaced 3%, and France’s CAC fell 2.8%.

Traders are anxious that price hikes by central banks determined to sort out hovering inflation will push economies into recession. Additional disruption to Russian power provides would additionally set off a European downturn, analysts have warned.

“Everyone seems to be searching for peak inflation, however we’re in all probability on the level the place it’s at its most harmful because it turns into sticky,” Neil Wilson of Markets.com stated.

“Excessive and sticky inflation is the worst mixture because it means expectations have been unanchored. This can solely push the Federal Reserve and different central banks to inflict extra ache.”

A leap in pure fuel costs on Tuesday, after strike motion compelled Norway’s Equinor to close three oil and fuel fields, added to considerations over the financial outlook.

“The panic crept again in on Tuesday as a contemporary surge in pure fuel costs upset the uneasy calm,” stated Raffi Boyadjian, the lead funding analyst at XM.

“Fears that the power disaster in Europe is about to get an entire lot worse sank the euro, which plummeted to the bottom since late 2002, crashing under the $1.03 degree. Apart from the specter of Russia reducing off fuel provides to Germany and different European importers, a strike at a number of fuel fields in Norway is fuelling the provision considerations,” Boyadjian added.

A survey of buying managers confirmed that enterprise development throughout the eurozone has slowed to a 16-month low, as manufacturing output fell and the price of residing disaster hit spending on companies.

Shares fell in New York as merchants returned to their desks after the Independence Day break. The S&P 500 index dropped 2% in early buying and selling, having already slumped by 20% within the first half of this 12 months.

The yield, or rate of interest, on UK, US and eurozone authorities bonds additionally tumbled on Tuesday, as considerations about financial development hit danger urge for food and elevated demand for safer belongings.