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Asia shares ease, euro slugged by energy crisis

A guy walks under an electric screen showing Japan’s Nikkei share price index in the conference hall in Tokyo, Japan June 14, 2022. REUTERS/Issei Kato

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  • Euro near 20-yr lows as Russia closes gas pipeline
  • S&P 500 futures edge up, European shares likely to skid
  • Oil prices rally as gas climbs, OPEC+ meets

SYDNEY, Sept 5 (Reuters) – Asian shares slipped on Monday as the euro took a brand new spill after Russia shut a significant gas pipeline to Europe, leading some governments there to announce emergency measures to help ease the pain of soaring energy prices.

The euro was down 0.4% at $0.9908 and looking more likely to test its recent 20-year low of $0.90005 as markets priced in more threat of a European recession. read more

Germany announced plans to invest 65 billion euros ($64.7 billion) on shielding customers and businesses from rising costs, while Finland and Sweden offered liquidity guarantees to help keep power companies open. read more

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Oil prices jumped combined with the whole energy complex as any occasion in U.S. markets designed for thin trading conditions. News of more coronavirus lockdowns in China only put into the jittery mood. read more

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) eased 0.1%, and Japan’s Nikkei (.N225) was off 0.3%.

Wall Street fared better as S&P 500 futures edged up 0.3% and Nasdaq futures 0.2%, though EUROSTOXX 50 futures were likely to open lower.

The power crisis can be an added complication for the European Central Bank (ECB) since it meets this week to take into account how much to improve interest levels. read more

“Europe is confronted with a dire energy outlook, with numerous anecdotes of firms reducing production,” said Tapas Strickland, head of market economics at NAB.

“The ECB will certainly opt to hike rates this week,” he added “Markets are near fully pricing in a 75bp hike after numerous ECB officials said these were leaning this way, though there’s still likely to become a debate around 50 v 75.”

EURO, STERLING STRUGGLE

Central banks in Canada and Australia may also be likely to raise interest levels this week, while Federal Reserve Chair Jerome Powell and many other policy makers can make appearances and so are more likely to sound hawkish on inflation.

As the August U.S. jobs report showed some welcome signs of cooling in the labour market, investors remain leaning toward a hike of 75 basis points from the Fed this month.

The two-year U.S. Treasury yield did fall almost 12 basis points on Friday and futures were trading flat on Monday amid general risk aversion.

The shift to safety again benefited the U.S. dollar, which hit another two-decade on top of a basket of major currencies at 110.040 .

The dollar was firm at 140.50 yen , just lacking Friday’s 24-year top of 140.80.

Sterling was struggling at $1.1481 , after diving as deep as $1.1458 and levels last observed in March 2020 in the beginning of the pandemic.

“We have now expect the EUR/USD and GBP/USD rates to attain $0.90 and $1.05 respectively next year because the economic slowdown and the terms of trade shock hitting the spot take their toll,” said Jonas Goltermann, a senior economist at Capital Economics.

British foreign minister Liz Truss said on Sunday she’d lay out immediate action in her first week in capacity to tackle rising energy bills and increase energy supplies if she actually is, needlessly to say, appointed prime minister on Monday. read more

The strong dollar kept gold flat at $1,709 an ounce .

Oil prices were supported by expectations gas prices would leap in Europe later in your day.

“Ultimately, Germany would have to cut gas consumption by 15% to help keep gas storage facilities from running empty,” said analysts at ANZ. “Gas rationing looks more than likely, as even at 95% full, storage would only last 2.5 months.”

OPEC+ is meeting on Monday and will probably keep oil output quotas unchanged for October, even though some sources wouldn’t normally rule out a little production cut to bolster prices which have slid because of fears of an economic slowdown. read more

Brent was up $1.54 at $94.56, while U.S. crude rose $1.38 to $88.25 per barrel.

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Reporting by Wayne Cole;Editing by Shri Navaratnam

Our Standards: The Thomson Reuters Trust Principles.

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