European Stocks Slide to Multi-Month Lows as Oil Hits $100 and ECB Rate Hike Looms

TLDR

European stocks fell sharply Wednesday, with major indexes hitting multi-month lows Brent crude crossed $100 a barrel for the first time since July, driven by Middle East conflict Iranian-backed Houthi strikes on Saudi cities and U.S. strikes on Iranian oil tankers escalated tensions The ECB is widely expected to raise rates by 25 basis points on Thursday Energy stocks bucked the trend, rising across the board while consumer and growth stocks fell

---

European equity markets took a sharp hit on Wednesday as two forces combined to unsettle investors: oil prices crossing $100 a barrel and an almost certain interest rate hike from the European Central Bank due Thursday.

The pan-European STOXX 600 fell 1.2%, closing at its lowest level since July 24. The STOXX 50 dropped 1.7%. It was a broad selloff that hit most sectors hard.

EURO STOXX 50 I (^STOXX50E)

Germany’s DAX fell 1.3% to its lowest since July 31. France’s CAC 40 dropped 1.5%, touching levels not seen since June 11. Spain’s IBEX 35 led the declines, falling 2% to its lowest since July 30.

The UK’s FTSE 100 held up better than its continental peers, falling 0.6%. Its heavy weighting in energy and resource companies helped cushion the blow.

Oil Crosses $100 as Middle East Tensions Escalate

Brent crude climbed 2.7% to $100.6 a barrel on Wednesday. That is the first time it has crossed the $100 mark since July.

The move came after Iranian-backed Houthi forces in Yemen launched coordinated strikes on several Saudi Arabian cities on Tuesday. The U.S. responded with strikes on Iranian oil tankers. Iran then launched a missile strike on a U.S. military base in Jordan.

The escalation raised fears about long-term disruption to oil supply, not just short-term shipping delays around the Strait of Hormuz.

Energy stocks moved higher as crude prices rose. Equinor gained 3.1%, Repsol rose 2.1%, BP added 1.8%, Shell climbed 1.2%, TotalEnergies gained around 1%, and Galp advanced 1.6%.

ECB Rate Hike Expected Thursday

Money markets have almost fully priced in a 25-basis-point rate hike from the ECB on Thursday, which would lift the deposit facility rate to 2.50%.

The move follows preliminary Eurozone inflation data showing headline consumer prices accelerating, driven by a sharp rise in energy costs. That leaves the ECB with little room to hold back.

Higher borrowing cost expectations pushed core European sovereign bond yields near multi-year highs, which in turn weighed on equity valuations across the region.

Traders are also watching for U.S. inflation data due later this week, which could add further pressure to global markets.

On the individual stock side, Finnish energy company Fortum surged 10% after signing a long-term power deal with Google for one of its nuclear plants.

Inditex, the owner of Zara, dropped more than 4% after disappointing investors on profitability, despite reporting currency-adjusted sales growth of 9% in August.

Rheinmetall fell 2.5%, nearly wiping out a 3% gain from the previous session.

The outlook for European markets remains uncertain heading into Thursday’s ECB decision and the upcoming U.S. inflation print.

The post European Stocks Slide to Multi-Month Lows as Oil Hits $100 and ECB Rate Hike Looms appeared first on CoinCentral.