August 16, 2022
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European Shares Slip Amidst Growth Concerns

On Monday, there was a decline in the DAX index of Germany, after Gazprom from Russia announced that gas supply to Germany was expected to fall via the Nord Stream 1 pipeline because of a new turbine halt. This fueled supply concerns, while overall economic growth worries were fanned by a batch of mixed earnings reports.

DAX falls

After making gains in afternoon trading, the DAX ended the day lower by 0.3%, after the announcement from Gazprom. The company announced that a Siemens gas turbine at the Portovaya compressor station of Nord Stream 1 was being shut down because of the engine’s technical condition.

Gazprom said that the throughput would start declining from Wednesday at 0400 GMT. The existing flows are already at 40% of the capacity and now they would come down to 33 cubic meters per day, which is half of the current supply.

Market analysts said that uncertainty persists in the markets and is affecting equity prices because it is not possible to predict what will happen. They added that until the US Fed makes its decision, things are unlikely to change. Until the US Federal Reserve starts changing its position towards a more dovish stance, or there is evidence that the economy is bottoming out, there will continue to be pressure on equity markets.

The Ifo institute in Germany showed that the risk of gas shortages and high prices of energy put a lot of pressure on business sentiment in the largest economy of Europe in this month.

Bank expectations

A survey was also conducted over the weekend, which showed that the soaring prices of energy are pushing a number of industrial companies in Germany to reduce their production. Last week, the data showed that there was an unexpected decline in the PMIs in July throughout the euro zone.

It is expected that the United States Federal Reserve will raise interest rates once more by 75 basis points this week on Wednesday when its two-day policy meeting comes to an end. The European Central Bank (ECB) also hiked the interest rate last week by 50 basis points, which was bigger than expected.

European indexes and stocks

There was a 0.1% rise in the continent-wide STOXX 600 index after it had spent the entire session struggling for some direction. There was a 1.7% rise in banks since they benefit from high-interest rates. It was also beneficial for indexes in Spain, as they are lender-heavy, allowing them to rise, as did indexes in Italy, and they managed to outperform their peers in the region.

Oil producers were the next gainers and miners followed. There was a 7.7% decline in Philips, the Dutch medical equipment maker because its core earnings for the second quarter saw a worse-than-expected drop because of lockdowns in China and supply bottlenecks. There was also a 2.9% decline in Almirall SA, as the pharma company missed out on expectations of its core earnings. A 4.8% gain was recorded in Bechtle, as the second-quarter earnings of the German IT systems provider turned out to be upbeat.

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