European stocks decline as Russian gas cut dims mood

Bloomberg

European stocks extended three days of declines as investors came to grips with the implications of cuts in gas supplies from Russia and the prospect of faltering growth.
The Stoxx 600 Europe Index fell almost 1% while S&P 500 and Nasdaq 100 contracts also gave up early gains in the wake of a technology-led slump that pushed the main US gauge to its lowest level in six weeks.
The dollar was around the highest level in nearly two years. Treasuries retreated but the 10-year yield, at about 2.77%,
remains lower for the week.
The euro touched the weakest level versus the greenback since 2017 amid worries that Moscow may choke gas flows to Europe, hurting the region’s growth in the ongoing fallout from Russia’s invasion of Ukraine.
Russia cut off supplies to Poland and Bulgaria, making good on a threat to halt flows to nations that refuse to pay for the fuel in rubles. European gas surged as much as 24%. Oil topped $102 a barrel amid the tension.
The energy brinkmanship, along with disappointment over earnings from the likes of Alphabet Inc. and Texas Instruments Inc., sowed further doubts about the outlook for markets. The mood was already fragile due to Fed tightening to quell inflation and slowing activity in China as Covid lockdowns bite.
“The backdrop for risk assets continues to be weak, and wasn’t helped by headlines of Russia halting gas supplies to Poland,” wrote Mizuho International Plc strategists including Peter Chatwell. “The market is moving quickly though, and if we get closer towards the 4200 level on the S&P 500, this may bring some temporary relief for risk, especially with the potential for some earnings positivity today.” The US stock gauge closed at 4175, the
lowest since March 14.
“Valuations already reflect a lot of the bad news,” Frederique Carrier, head of investment strategy at RBC Wealth Management, said on Bloomberg TV. “We would look to buy on the weakness,” she added, as “the impact on the economy from geopolitics seems to be taken on board already.”
The region’s main equity benchmark has struggled to find its footing this year amid record inflation readings and a hawkish pivot by central banks increasingly anxious to tame soaring prices. The war in Ukraine has exacerbated the continent’s energy crunch, further clouding the outlook, even as quarterly earnings releases continue to show resilience.
Gains in Microsoft Corp in extended trading on better-than-expected results may be helping US futures. Among European firms, Credit Suisse Group AG reported a loss, while Deutsche Bank AG beat some estimates.
An Asia-Pacific stock gauge falls to the lowest since mid-2020. But China bucked the trend, carving out an advance after President Xi Jinping vowed more infrastructure projects — the latest step to support a lockdown-hit economy. Covid outbreaks in Shanghai and Beijing also showed some signs of steadying.