European markets are expected to open lower on Wednesday due to investors’ continued focus on the region’s impending recession and the rising inflationary pressures. Investors are also expecting the release of the U.S. Federal Reserve’s Beige Book, a summary of the state of the economy, later on, Wednesday.
U.S. bond yields spiked overnight, pushing the 10-year Treasury yield to its highest level since June. The 30-year Treasury rate reached its highest closing point since 2014 on Friday. Bond yields move opposite to prices.
On Wednesday, markets in the Asia-Pacific region also fall. According to data, China’s exports increased by 7.1% in August compared to the same month last year, falling short of the 12.8% forecast in a Reuters poll after increasing by 18% in July.
At the same time, rising tensions over Russian gas supplies to Europe are expected to boost oil and gas stocks. This year, Russian gas exports to Europe have decreased by 89% due to EU sanctions against Moscow. This is due to the announcement that the Nord Stream 1 pipeline’s halted gas flows would be permanent.
Analysts predicted that even if Europe adhered to its proposed 15% reduction in gas consumption and supplemented with alternate fuels, there would still be a significant fuel shortage this winter, around 51 million megawatt hours from September to March of the following year.
To cover the supply shortage, the total electricity demand would still need to decrease by 5%, a target that “would appear a stretch” for the 27-country bloc. The chief market strategist at SlateStone Wealth, Kenny Polcari, advised investors to focus on large U.S. energy companies with strong dividend payers.