06.09.2022
The EU and US labor market data showed a strong picture last week. Despite the somewhat less filled order books in the EU, demand for skilled workers remains very high.
Inhalt
Gas supply stop dampens the mood
Agreement on a third aid package
But the U.S. economy expects a slowdown in income growth. European stocks rose 2.5% on Friday, but news broke after the market closed that Russian gas company Gazprom would keep gas taps closed after the three-day maintenance period that normally ends on Saturday, citing a "leak." Earlier, there were some reports from the Kremlin suggesting this would happen, but these were ignored. U.S. indices then gave up their gains of up to 1.3% into similar sized losses (Nasdaq). Both risk sentiment and U.S. economic data worked in favor of bonds. European swap yields fell 2.9 basis points to 7 basis points, but it should be noted that these changes occurred before the official Gazprom announcement. EUR/USD (dollar weakness) gains quickly fizzled out. The pair eventually closed more or less unchanged just below parity. The gas story dominated the Asian markets this morning and spilled over into European trading. Spot markets in the Asia-Pacific region held their losses in check, but futures in Europe pointed to an ugly -3% opening. The significant price losses then held throughout the day.
Gas prices rose sharply when the market opened and remain at the level.
Germany, meanwhile, announced a €65 billion aid package that will be partly financed by a special tax on power producers. A special EU summit on the energy crisis will be held Friday to propose a series of measures. Oil prices rise more than 2% as investors await the chances of production cuts by OPEC later in the day. In addition to the energy sector, the ECB will also be in focus this week. All indications are that the ECB will raise rates by 75 basis points on Thursday, especially given the recent escalation in the energy market. But whether expectations of a hawkish ECB will be enough to drive core/European bond yields in the current low-risk environment is doubtful. We expect classic flight-to-follow for the time being. The euro is and will likely remain under pressure, which is another argument for forceful ECB action. EUR/USD drops below year-to-date lows below 0.99 to weakest level in two decades. The break further worsens the technical picture. However, we continue to expect the EUR to recover.
The EU and US labor market data showed a strong picture last week. Despite the somewhat less filled order books in the EU, demand for skilled workers remains very high.
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