Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Europe Energy, OPEC+ Meeting, Truss Triumph - What's Moving Markets

Published 05/09/2022, 12:08
Updated 05/09/2022, 12:08
© Reuters.

© Reuters.

By Geoffrey Smith 

Investing.com -- Moscow's gas shut-off heightens the energy emergency in Europe, driving the euro to a new 20-year low. OPEC meets with Russia to discuss output strategy for October. The U.K. is set to get a new Prime Minister. Volkswagen is set to approve an IPO for Porsche, unlocking value to fund its electrification ambitions, and Bed Bath & Beyond is struck by a human tragedy. Here's what you need to know in financial markets while the U.S. celebrates Labor Day on Monday, 5th September.

1. Gas shut-off deepens Europe's energy crisis; Euro hits new low

Europe’s energy emergency deepened after Russia closed down the Nord Stream 1 pipeline to Germany late on Friday, raising fears that the continent will have to do without natural gas from its biggest supplier this winter. Russia attributed the shutdown to technical problems that required maintenance.

The developments make a deeper recession and a higher peak in inflation likely, with natural gas and electricity prices surging again and the euro falling to a new 20-year low against the dollar. 

Over the weekend, Germany announced a new windfall tax on electricity producers to help fund a 65 billion euro ($64 billion) relief package for households and businesses. Sweden and Finland also offered emergency liquidity backstops to energy suppliers to ensure that the key Nordic power market continued to work. 

2. OPEC+ to meet as G-7 moves to cap price of Russian exports

Russia’s move on Friday came as a response to the G-7’s decision to impose a price cap on Russian oil exports, a move that aims to reduce the cash flowing to Vladimir Putin’s government, but one that comes with severe implementation difficulties.

Russia’s energy minister will meet with his counterparts at the Organization of Petroleum Exporting Countries later, amid suggestions that the bloc will cut its output by as much as 100,000 barrels a day in October, reversing the token increase it agreed a month earlier.

What practical impact that would have when OPEC+ countries are already producing almost 3 million barrels a day below their agreed quotas is unclear.

U.S. crude futures rose 2.7% to $89.25 a barrel, while Brent crude rose 2.9% to $95.73 a barrel.

3. European stocks tumble on gas news; VW to approve Porsche IPO

U.S. stocks are closed for the Labor Day holiday, but Europe’s are a hot mess in the wake of the news out of Russia on Friday.

By 06:20 ET, the benchmark STOXX 600 was down 1.1% but the DAX in Germany and FTSE MIB in Italy, the indices for the two economies most exposed to Russian gas shortfalls, were both down over 2%, paring losses after having initially fallen over 3%.

Stocks likely to stay in focus later include Volkswagen (ETR:VOWG_p), whose board is set to approve the IPO of preference shares in Porsche, hoping to raise funds to finance an enormous investment budget for the electric transition over the coming years. It's also set to approve the sale of a 25% block of voting shares in the sports car maker to Porsche Automobil Holding, the company through which the Piech and Porsche families control the VW group.

4. Truss set to be named new U.K. Conservative leader

Liz Truss is set to become the U.K.’s next Prime Minister when the Conservative Party announces the results of its leadership election at 08:30 ET. Truss appears to have the overwhelming backing of the party membership, after focusing her campaign on the need for tax cuts, while also promising big increases in spending on defense.

Truss has promised to decide on a package of measures, relieving the pain of the energy crisis within a week of being confirmed in office.

The developments should end a damaging period of uncertainty that has undermined both the pound and the U.K. government bond market in recent weeks. However, many other questions, such as Truss’s intentions with regard to the Bank of England’s independence and her attitude to EU relations (where her team is reportedly planning to rip up the U.K.’s Brexit deal) remain unanswered.

5. Bed Bath & Beyond CFO commits suicide

Bed Bath & Beyond’s (NASDAQ:BBBY) chief financial officer Gustavo Arnal committed suicide at the weekend, two days after the company announced a plan to close around a fifth of its stores and slash thousands of jobs.

His death leaves BBBY without either a CFO or a permanent CEO as it struggles to finalize its accounts for the quarter ending August 27th.

Arnal had been named as defendant alongside Chewy (NYSE:CHWY) founder and GameStop (NYSE:GME) chairman Ryan Cohen in a shareholder lawsuit that is seeking class-action status. The suit alleges the pair sought to inflate BBBY’s stock price before Cohen dumped his stock in the market last month, to the dismay of retail investors who had expected Cohen to lead a turnaround at the struggling retailer.

Bed Bath & Beyond, along with other meme stocks, has become a byword for the gamification of financial markets over the last couple of years.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.