World Indices in Sharp Risk-Off Trading Following OPEC+ Meeting and News of Deepening Energy Crisis in Europe

Today, the U.S. markets are on pause, observing the continuation of Labor Day’s long weekend. European stocks had advanced on Friday to round out another week of brutal losses, as investors reacted to a key U.S. jobs report which showed the U.S. economy added 315,000 jobs in August. The figure was just below the consensus estimate of 318,000, while the unemployment rate rose to 3.7%, slightly above expectations of 3.5%.

Commoditywise, crude oil prices are rising more than 2% after today’s OPEC+ meeting. Just to remind, last week the G-7 reached an agreement to put a cap on Russian oil prices over the weekend and OPEC+ just agreed to cut output by 100K bpd starting in October. This small cut effectively reverses the 100K bbl/day that OPEC+ said it would add to the market last month. As a result, U.S. WTI crude for October delivery is adding 3.3% at $90.19/bbl, and November Brent crude is surging 3.74% at $96.79/bbl.

European markets fell sharply this afternoon as investors ponder economic risks in the region, reignited by concerns about energy supply from Russia. The pan-European Stoxx 600 is trending down 0.75% as of 4:25 p.m. CET, having recouped some of its earlier heavier losses. The British FTSE 100 is losing a minimal 0.15% while the French CAC 40 Index plunged 1.29%, and the German DAX shed 2.25%. Automotive sector stocks shed 3.9% to become the biggest lossmakers as most sectors and major exchanges slid deep into negative territory. Meanwhile, energy stocks bucked the downward trend to add 1.6% as prices spiked once more.

The sharp reversal to risk-off trading came after Russia’s gas monopoly Gazprom announced that gas flows to Europe via the Nord Stream 1 pipeline would be halted indefinitely, citing lack of logistics options after repair of some gas turbines amid international sanctions. Meanwhile, European gas prices are up as much as 35% to €284/MWh, with the euro falling sharply against the dollar, currently trading at 0.9926 as European gas prices went into a parabolic ascent.

Britain’s ruling Conservative Party picked Liz Truss to be its new leader and the U.K.’s new prime minister. Truss, until now the U.K.’s foreign minister, beat rival Rishi Sunak, the country’s former finance minister, to win the leadership race. She is facing a network of deep-seated economic and financial problems, including the British pound being near the lowest levels in decades, an unprecedented surge in government borrowing costs and brutal underperformance of domestic stocks.

Earlier this morning, shares in the Asia-Pacific traded mixed as the U.S. dollar strengthened sharply in its renewed risk-off rout in Asia trade. MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.55% lower. Hong Kong’s Hang Seng Index fell 1.1% in the final hour of trade, leading losses regionally, with electric vehicle and tech stocks being the worst performers. In Japan, the Nikkei 225 slipped 0.11% to close at 27,619.61 and the Topix index was marginally lower at 1,928.79.

Meanwhile, the Shenzhen index of mainland China dipped 0.2% to 11,679, but the Shanghai Composite rose 0.42% to 3,200. China’s Caixin Services Purchasing Managers’ Index came in at 55.0, compared with July’s print of 55.5. In South Korea, the Kospi shed 0.24% to 2,404 while S&P/ASX 200 in Australia gained 0.34% to 6,852.