European natural gas prices climbed Thursday towards a record peak on heightened fears over Russian supplies, while equities marked time on the eve of a key speech from Federal Reserve chair Jerome Powell.
Europe’s benchmark Dutch TTF gas contract advanced to 318 euros per megawatt hour before paring gains.
That was not far from the record high 345 euros struck in March shortly after key gas producer Russia invaded Ukraine.
Prices have spiked in recent days as a three-day halt in Russian deliveries to Germany via the Nord Stream 1 pipeline approaches amid fears that Moscow will not turn the taps back on afterwards.
At the same time, one-year forward contracts for electricity prices in both France and Germany surged on Thursday to record pinnacles on worries over a winter energy crunch.
– ‘Unstoppable march upwards’ –
“Gas is on a seemingly unstoppable march upwards again, a dramatic move which will intensify the energy crisis,” said Hargreaves Lansdown analyst Susannah Streeter.
“Already plans are being brought in to save energy which will darken streets across Germany and make public buildings colder, but much tougher measures may have to be enforced given dwindling gas reserves.”
In stock market trade, European equities were broadly steady, with Frankfurt drawing some strength from news that the German economy expanded by an anaemic 0.1 percent in the second quarter.
That was upgraded from the prior projection of zero growth, but analysts remain downbeat.
“I’m trying to find a reason to be optimistic on the back of that, but in reality it just means the economy may take a little longer to fall into recession,” warned OANDA analyst Craig Erlam.
“With the energy crisis unlikely to improve, this likely means another quarter of flat growth at best before the economy falls into recession later this year.”
Wall Street opened mixed, with the Dow dipping, as traders looked to central bankers meeting in Jackson Hole in the US state of Wyoming this week.
All eyes are on Powell’s Friday speech for clues about the Federal Reserve’s plans to tame runaway inflation with higher borrowing costs.
Central banks around the world are trying to find a delicate balance between curbing inflation and avoiding recessions.
The challenge has been compounded this year by Russia’s invasion of Ukraine, which has sent energy and food prices skyrocketing.
There are concerns that the Fed’s fight against soaring inflation could lead to a recession in the United States, which could, in turn, hit a global economy that is still recovering from the Covid pandemic.
But the latest data out Thursday showed a continuing drop in first time claims to 243,000 last week, suggesting the US economy remains strong.
“A reading below 250,000 certainly indicates that labor market conditions remain tight, which means the potential for sticky wage-based inflation pressures also remains tight, and that is unlikely to be a comforting indication for Fed officials,” said Briefing.com analyst Patrick O’Hare.
US second quarter GDP figures were also revised higher, to a 0.6 percent contraction from the initial estimate of a 0.9 percent contraction.
– China stimulus –
Asian indices rose after China unveiled fresh measures to boost its economy.
Fresh measures to shore up the economy were announced by China’s State Council on Wednesday, including steps to encourage lending, consumption and investment, according to the official Xinhua news agency.
They also included support for electricity producers and agriculture, two sectors hit especially hard by the heatwave, though Xinhua’s readout of the State Council meeting did not mention the extreme weather.
– Key figures at around 1330 GMT –
London – FTSE 100: UP less than 0.1 percent at 7,478.02 points
Frankfurt – DAX: UP less than 0.1 percent at 13,230.34
Paris – CAC 40: DOWN 0.2 percent at 6,373.08
EURO STOXX 50: DOWN 0.1 percent at 3,663.21
New York – Dow: DOWN less than 0.1 percent at 32,956.25
Tokyo – Nikkei 225: UP 0.6 percent at 28,479.01 (close)
Hong Kong – Hang Seng Index: UP 3.6 percent at 19,968.38 (close)
Shanghai – Composite: UP 1.0 percent at 3,246.25 (close)
Euro/dollar: DOWN at $0.9966 from $0.9970 on Wednesday
Pound/dollar: UP at $1.1807 from $1.1799
Euro/pound: DOWN at 84.42 pence from 84.47 pence
Dollar/yen: UP at 136.78 yen from 136.36 yen
West Texas Intermediate: UP 0.4 percent at $95.29 per barrel
Brent North Sea crude: UP 0.6 percent at $101.86
© Agence France-Presse