European stock exchanges open the week with a sharp drop after Russia’s decision to keep the Nord Stream gas pipeline closed indefinitely. Frankfurt and Milan lost 2.8%, worse than Paris (-1.9%) and London (-1.7%), paying a higher price for their dependence on Russian gas. On the other hand, the price of gas has jumped to 264 euros per megawatt hour on the Amsterdam market (+ 23%), while the euro remains below par with the dollar at 0.99 after having slipped to 0.98 for the first time in twenty years. The BTP-Bund spread widened by 8 basis points to 238, with the Italian ten-year yield rising by 12 basis points to 3.937%, in a context of generalized sales on Eurozone bonds.
Oil is no better with WTI up 2.5% to $ 89 a barrel and Brent up 2.7% to $ 95.55 in view of the expected cut in production by OPEC + countries , intent on keeping black gold prices high.
The bag
The stock market fell sharply at the start of the session, in line with the other European exchanges, after the announced suspension of Russian gas supplies through Nord Stream. Oil is saved on the Milanese list, with Eni + 0.6%, Tenaris + 0.7%, down the other leading stocks in the basket. Banks in difficulty with Intesa -3.5%, Bpm -3.6%, Bper -3.2%, Unicredit -4%. Mps was also bad (-3.3%) for which the ECB’s ok for the capital increase was received. Assets under management were also weak. Among the industrialists, Stellantis lost 2.4, Leonardo -2.1%, Interpump -3.2%. Atlantia holds its own with -0.2%.
Asia was also weak in the morning with Tokyo losing 0.11%, Hong Kong 1.2% and Seoul 0.24%. The Chinese squares were mixed with Shanghai which recorded a + 0.4% and Shenzhen which closed down 0.2%.
Nord Stream
The closure of the pipeline came close to an agreement between US-led countries to look for a way to limit the prices paid for Russian oil exports and raised fears that parts of Europe may be forced to ration the ‘power. “If the Europeans decide in an absolutely absurd way to refuse the maintenance of their equipment, or rather, the equipment that belongs to Gazprom, but which they are contractually obliged to overhaul, it is not Gazprom’s fault,” said Kremlin spokesman Dmitry. Peskov in an interview with Russian state television. Deputy Prime Minister Alexander Novak said Siemens Energy must comply with the terms of the turbine maintenance contract for the equipment to continue operating.
What the markets expect
The week begins, however, with reduced trading with the closing of the US stock exchange for the Labor Day holiday. And so in addition to gas, today, attention is focused on the OPEC + meeting in which producers will discuss the hypothesis of a cut. to production to support oil prices. It is probably still early days for such a decision, waiting to hear about the developments on the negotiations related to the Iranian nuclear deal, which could potentially bring to the market an additional offer of over 1 million barrels a day. Jean-Pierre Durante, chief researcher of Pictet Wealth Management, takes care of the situation in the oil market. “The global supply of oil has continued to increase in the last three months, at a rate of 1.6 million barrels per day – he explains – Meanwhile, the slowdown in the global economy has depressed the demand for oil by -2 million. barrels per day for the past five months. As a result, the global oil market remained in slight oversupply, averaging +0.4 million barrels per day in 2022. Should the weakness in demand persist, OPEC + is likely to act swiftly to reduce oil demand. offer. As a result, we expect oil prices to rebound after a temporary phase of weakness. And we are revising our year-end forecast for Brent at $ 100 a barrel compared to the $ 110 previously forecast ».