Morning Bid: Energy rescues | Reuters

A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., August 29, 2022. REUTERS/Brendan McDermid

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A look at the day ahead in the US and world markets from Mike Dolan.

As US markets were quiet for Labor Day and digesting the August jobs report, attention turned squarely on Europe’s energy crisis and how governments in the European Union and a new prime minister of the The United Kingdom would face a total gas cut in Russia.

Monday was disruptive for stocks and currencies in the region, with little realistic prospect of Russia resuming gas supplies via the Nord Stream 1 pipeline anytime soon. read more

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But while still triple the levels of earlier this year, natural gas prices in Europe did not return to last month’s highs despite Moscow’s latest move and have since retreated again, with the Dutch benchmark falling. 30% in the last two weeks. .

Similarly, crude oil prices failed to make significant gains even in the face of OPEC’s decision Monday on a small production cut, and remain nearly 25% below mid-year highs. read more

Despite all the thorny supply issues, tighter energy prices reflect fears of an inevitable global recession, a wave of European price caps and industry supports, and coordinated moves to reduce energy use and increase the substitution of alternatives. read more

Germany announced some 65 billion euros ($65 billion) of support on Monday, while new UK Prime Minister Liz Truss was reported to earmark a package of more than 100 billion pounds for both price caps of energy to protect homes and businesses. read more

As a result, the mood in global stock markets was calmer on Tuesday, with UK and European indices flat to firmer and Wall Street futures up around half a percentage point ahead of the open.

China’s stocks outperformed, with policymakers signaling a renewed sense of urgency on Monday to take action to prop up the flagging economy. read more But the yuan continued to fall to 2-year lows, despite China’s central bank’s decision to lower foreign exchange reserve requirements to stem its decline. read more

UK mid-cap stocks focused on the domestic market (.FTMC) outperformed in Europe on hopes of the government’s long-awaited energy plan. But, absorbing the prospect of such high government spending along with possible tax cuts, UK government bonds continued to lag, with 2-year and 10-year gilt yields holding at 14- and 8-year highs, respectively. .

The US dollar continued to make new highs on many fronts. But with relative interest rate moves in the spotlight ahead of possible 75 basis point (bp) hikes from both the European Central Bank and the Bank of England over the next two weeks, Tuesday’s dollar gains were concentrated in Asia.

The dollar hit a new 24-year high of 141.73 Japanese yen and a new 2-year high against the Chinese yuan. But it pulled back from Monday’s new highs against the euro and sterling and that saw its DXY

Australia’s dollar fell back to its lowest level since July after the Reserve Bank of Australia raised its main policy rate by 50 basis points, its fifth move since May and signaling more to come, but now significantly slower than expected in the Federal Reserve or Europe. central banks read more

Key developments that should provide further direction to US markets later on Tuesday:

* US ISM and S&P Global, August Service Sector and Composite Business Surveys

* IMF Director Kristalina Georgiev speaks at the Bruegel think tank conference in Brussels on global fragmentation

* Central Bank of Chile holds meeting of the monetary policy committee

Two-year yield gaps vs. US Treasuries.

($1 = 1.0045 euros)

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By Mike Dolan, edited by XXX [email protected]. Twitter: @reutersMikeD Edited by Mark Potter

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The opinions expressed are those of the author. They do not reflect the views of Reuters News, which, according to the Trust Principles, is committed to integrity, independence and freedom from bias.

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