European natural gas prices climbed Thursday towards a record peak on heightened fears over Russian supplies, while global equities rose on the eve of a key speech from Federal Reserve chair Jerome Powell.
Europe’s benchmark Dutch TTF gas contract advanced to 318 euros per megawatt hour before paring gains.
That was not far from the record high 345 euros struck in March shortly after key gas producer Russia invaded Ukraine.
Prices have spiked in recent days as a three-day halt in Russian deliveries to Germany via the Nord Stream 1 pipeline approaches.
At the same time, one-year forward contracts for electricity prices in both France and Germany surged on Thursday to record pinnacles on worries over a winter energy crunch.
– ‘Gas on unstoppable march upwards’ –
“Gas is on a seemingly unstoppable march upwards again, a dramatic move which will intensify the energy crisis,” said Hargreaves Lansdown analyst Susannah Streeter.
“Already plans are being brought in to save energy which will darken streets across Germany and make public buildings colder, but much tougher measures may have to be enforced given dwindling gas reserves.”
In stock market trade, European equities pushed higher mirroring Asian gains.
Frankfurt also drew some strength from news that the German economy expanded by an anaemic 0.1 percent in the second quarter.
That was upgraded from the prior projection of zero growth, but analysts remain downbeat.
“I’m trying to find a reason to be optimistic on the back of that, but in reality it just means the economy may take a little longer to fall into recession,” warned OANDA analyst Craig Erlam.
“With the energy crisis unlikely to improve, this likely means another quarter of flat growth at best before the economy falls into recession later this year.”
Asian indices rose after China unveiled fresh measures to boost its economy.
Traders followed a positive lead from Wall Street, where the Dow, Nasdaq and S&P 500 all closed higher.
Meanwhile, central bankers are meeting in Jackson Hole in the US state of Wyoming this week.
All eyes are on Powell’s Friday speech for clues about the Federal Reserve’s plans to tame runaway inflation with higher borrowing costs.
There are concerns that the Fed’s fight against soaring inflation could lead to a recession in the United States, which could, in turn, hit a global economy that is still recovering from the Covid pandemic.
– China stimulus –
Central banks around the world are trying to find a delicate balance between curbing inflation and avoiding recessions.
The challenge has been compounded this year by Russia’s invasion of Ukraine, which has sent energy and food prices skyrocketing.
Traders are also keeping an eye on how China will repair the economic damage from its strict Covid controls, a crisis in its property sector and power shortages caused by a record-breaking heatwave.
Fresh measures to shore up the economy were announced by China’s State Council on Wednesday, including steps to encourage lending, consumption and investment, according to the official Xinhua news agency.
They also included support for electricity producers and agriculture, two sectors hit especially hard by the heatwave, though Xinhua’s readout of the State Council meeting did not mention the extreme weather.
Key figures at around 1010 GMT –
London – FTSE 100: UP 0.4 percent at 7,501.04 points
Frankfurt – DAX: UP 0.2 percent at 13,251.85
Paris – CAC 40: UP 0.1 percent at 6,395.84
EURO STOXX 50: UP 0.2 percent at 3,674.31
Tokyo – Nikkei 225: UP 0.6 percent at 28,479.01 (close)
Hong Kong – Hang Seng Index: UP 3.6 percent at 19,968.38 (close)
Shanghai – Composite: UP 1.0 percent at 3,246.25 (close)
New York – Dow: UP 0.2 percent at 32,969.23 points (close)
Euro/dollar: UP at $0.9999 from $0.9970 on Wednesday
Pound/dollar: UP at $1.1842 from $1.1799
Euro/pound: DOWN at 84.44 pence from 84.47 pence
Dollar/yen: UP at 136.42 yen from 136.36 yen
West Texas Intermediate: UP 0.1 percent at $94.94 per barrel
Brent North Sea crude: UP 0.1 percent at $101.32