Europe close: Stocks hit by recession worries, Oil and Gas names pace losses
European shares reeled on Wednesday, surrendering early gains as global recession worries supplanted the positive mood among investors early on thanks to reports that the US could ease tariffs on China.
"Once again, the return of US traders from their holiday has dealt the death blow to hopes of a European market rally that lasts longer than about 24 hours," said Chris Beauchamp, chief market analyst at IG.
"Normally July provides some welcome relief to markets after a choppy June, but so far the instinct to sell any bounce, no matter how small, remains all-encompassing."
Equity strategists at Berenberg were in a similar frame of mind, recommending clients adopt strategies to hedge against stagflation, adding that they remained in a 'sell the rally' mode.
The pan-regional Stoxx 600 index fell 2.11% to 400.68 with all major continental stock market indices lower by even more alongside, including nearly 3% drops for the German Dax and Italian FTSE Mib.
Within the Stoxx 600, Oil&Gas fared worst among sectors, shedding 6.25% as front-dated Brent surrendered 10.34% to $103.16 a barrel.
Not lost on traders, the rout in crude was quickly reflected in the Russian rouble, which cratered 15.1% against the Greenback to 64.7695.
Euro/dollar meanwhile broke technical support, in the form of its early 2017 lows, triggering an outsized 1.71% decline to 1.0244.
"It will continue to be very difficult for EUR to rally in any meaningful way with the energy picture worsening and risks to economic growth increasing notably," MUFG analyst Derek Halpenny said in a research note sent to clients, Dow Jones Newswires reported.
Halpenny's forecast for euro/dollar in the third quarter was 1.01.
Banks lost 3.4% as a sector with the Bank of England's Financial Stability Board announcing a 100 basis point hike in UK lenders' counter-cyclical buffers to 2.0%.
In parallel, analysts at Saxo Bank were highlighting the rise in the ECB's Systemic Stress Index back to its levels from early 2020.
Periphery bond yields on the other hand were well-behaved, retreating a bit.
US markets were closed overnight for the Independence Day holiday.
S&P Global's euro area services sector Purchasing Managers' Index for June meanwhile was marked up to a reading of 53.0, versus a preliminary reading of 52.8 (consensus: 52.8).
However, that remained well off May's print of 56.0.
In equity news, SAS fell 10% after it filed for bankruptcy and warned that a strike action by pilots had impacted its financial position and liquidity.
Shares in German gas giant Uniper plummeted 13.4% even as the government pondered taking a stake in the firm, which has been forced to buy gas at spot prices due to the war in Ukraine.
Remy Cointreau rose 5% after Jefferies upgraded the French spirits group's stock to 'buy' from 'hold'.