Euro, stocks and pound counterattack after latest energy shock

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  • European stocks rise slightly as gas prices fall after peak
  • Yen hits 24-year low, euro and pound higher
  • Bond markets expect an oversized 75 basis points from the ECB on Thursday
  • Oil slumps after modest OPEC supply cut

LONDON, Sept 6 (Reuters) – European stock markets, the euro and the pound all climbed higher on Tuesday as petrol prices fell 10%, although bond market costs d continued to rise and the Japanese yen hit a new 24-year low. .

The mood was noticeably calmer after Monday’s chilling reaction to Moscow’s latest gas supply cuts. It was also hoped that new British Prime Minister Liz Truss would launch an instant relief package there, but the hurt from soaring energy costs was evident in the markets.

Even the morning rise of 0.45% of the euro could not make it exceed the parity /FRX. The rebound in the STOXX 600 (.STOXX) was a modest 0.25%, while Italian bond yields held near 4% on bets that the European Central Bank will have to raise rates by a record high. 0.75 later this week.

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“It’s perhaps natural that we’re taking a little break here, but it’s hard to see where the good news will come from,” Abrn chief investment officer James Athey said.

Russian gas would remain the “sword of Damocles” hanging over the European economy, he added, as the scale of interest rate hikes likely to occur and the risk of recession was still not fully taken into account.

“We are still in a strong dollar, low risk environment for the foreseeable future,” Athey said.

The pound, which has been one of the world’s weakest major currencies over the past month, gained 0.5% as the installation of Liz Truss as Britain’s new prime minister fueled expectations. a major energy relief program in the coming days.

U.S. stocks looked set to open higher after Monday’s Labor Day holiday, while the Chinese yuan hit a more than two-year low in Asia after Beijing’s latest stimulus effort slashed again. foreign exchange reserve needs.

The major stock markets had barely moved there. The MSCI gauge for Asia Pacific ex-Japan stocks (.MIAPJ0000PUS) ended 0.02% in the red and the Tokyo Nikkei ended almost exactly where it started.

Yen sellers had cornered all the action, sending the currency to another 24-year low of 141.56 against the dollar.

Movements in other crosses were even more striking. The euro jumped 1.2% to 141.2 yen and the pound gained 1.4% to 163.92 yen.

European currencies have been falling for more than a year


By contrast, the Australian dollar was little changed after the Reserve Bank of Australia hiked its interest rate another 50 basis points and signaled more were to come, with the caveat that it won’t. was not on a predefined trajectory. Read more

“After seeing the breakout of 140 (for the dollar/yen)…momentum has definitely been skewed by yen weakness,” said Galvin Chia, strategist at NatWest Markets.

“As long as (yield curve control) is in play, and as long as interest rate divergence is in place, one of those side effects would be a weaker yen.”

The European Central Bank is expected to raise rates sharply at its meeting on Thursday. European energy ministers are due to hold an emergency meeting on the gas crisis on Friday while the US Federal Reserve’s next rate decision comes on September 21. read more

Deutsche Bank strategist Jim Reid pointed out that markets now expect not only a 75 basis point rate hike from the ECB on Thursday, but also two more of 50 basis points by the end of the month. year, which would materialize its fastest increase in borrowing costs.

Back in commodity markets, oil prices fell, paring the previous session’s 3% gain, after an agreement among members of the OPEC+ group to cut production by 100,000 barrels a day in October was seen as largely symbolic.

Brent crude futures fell 0.7% to $95.07 a barrel, compounding morning losses. U.S. crude futures, however, rose 2.12% to $88.71 a barrel.

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Additional reporting by Kane Wu in Hong Kong and Alun John in London; Editing by Susan Fenton

Our standards: The Thomson Reuters Trust Principles.


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