European equities mixed on concerns over energy supply
The pan-European Stoxx 600 edged 0.05% lower to 616.95, as Germany’s DAX gained 0.36% to 24,154.47, while France’s CAC 40 slid 0.14% to 8,262.70
European equities closed mixed on Thursday as investors weighed ongoing geopolitical developments in the Middle East, alongside growing concerns over energy supply disruptions, with sentiment remaining sensitive to the direction of diplomatic talks.
The continuation of the equity rally now rests on further talks between the US and Iran, said Chris Beauchamp, chief market analyst at IG, adding that headlines can only drive a market so far.
Having posted an eye-watering surge from the end of March, equity markets now need substantive progress in talks if the recovery is to make further progress, he said.
The pan-European Stoxx 600 edged 0.05% lower to 616.95, as Germany’s DAX gained 0.36% to 24,154.47, while France’s CAC 40 slid 0.14% to 8,262.70.
London’s FTSE 100 outperformed, adding 0.29% to 10,589.99.
Oil prices moved sharply higher, with Brent crude last up 3.77% on ICE at $98.51 per barrel, reflecting continued supply concerns linked to the war.
Patrick Munnelly, market strategy partner at TickMill, said UK equities traded modestly higher on Thursday, with the major indices supported by strength in materials, financials, and construction-related names, as investors responded positively to renewed signs of possible de-escalation in the Middle East, adding that the tone was broadly constructive across cyclicals, with investors also digesting stronger-than-expected domestic growth data.
Energy market concerns intensified after International Energy Agency chief Fatih Birol warned that Europe could run out of jet fuel within six weeks if oil flows remained disrupted.
He described the situation as “the largest” energy crisis ever faced, cautioning that it is going to have major implications for the global economy, adding that the longer it goes, the worse it will be for the economic growth and inflation around the world.
Birol warned of “higher petrol prices, higher gas prices, high electricity prices,” and said some regions would be hit harder, particularly the economies of some Asian countries, Africa and Latin America, before the impact spread to other parts of the world such as Europe and the Americas.
He added that if the Strait of Hormuz remained closed, “we will soon hear the news that some of the flights from city A to city B might be cancelled as a result of lack of jet fuel,” while cautioning against the longer-term risks of Iran’s proposed “toll booth” system for oil shipments.
If we change it once, it may be difficult to get it back, he said, warning it could set a precedent for other key shipping routes such as the Malacca Strait.
I would like to see that the oil flows unconditionally from point A to point B, he added.
On the macroeconomic front, eurozone inflation for March was revised slightly higher, with consumer prices rising 2.6% year on year, up from 1.9% in February and above the flash estimate of 2.5%.
Energy inflation was revised to 5.1% from 4.9%, while core inflation remained unchanged at 2.3%, according to Eurostat.