Premarket stocks: The energy crunch is roiling markets
What’s happening: Global markets are stumbling Tuesday as energy prices soar. One big problem has been shortages of natural gas, triggered by low stocks and a jump in demand as activity recovers from its Covid-19 lull.
Asia is now “scrambling” to secure natural gas for immediate delivery “in the same way Europe is,” Marzec-Manser told me. And while the prices “are nowhere near comparable” in the United States, they’re clearly on a steep upward trajectory, he added.
The circumstances put growing pressure on national governments, which are trying to limit instability by shielding residents from the effects of higher costs and shortages. For investors, the fallout presents another key risk.
Watch this space: There were already concerns that the economic recovery was losing momentum in both the United States and China. Turmoil in energy markets only stands to make matters worse.
Analysts at Nomura trimmed their forecast for Chinese growth in 2021 by half a percentage point to 7.7% on Friday, citing the “rising number of factories” that have had to “cease operations,” either because of local energy consumption mandates or power outages due to rising coal prices and shortages.
Goldman Sachs followed on Tuesday, cutting its 2021 GDP growth forecast to 7.8% from 8.2%, pointing to “recent sharp cuts to production in a range of high-energy intensity industries.”
“Short-term economic activity will likely experience a greater drag from this shock than from Evergrande,” Craig Botham, chief China economist at Pantheon Macroeconomics, told clients Tuesday, referring to the debt-laden Chinese real estate developer whose potential collapse is being monitored closely.
Markets drop: Anxiety about rising energy prices is tied to broader fears about inflation, which have been pushing up bond yields. Higher yields, which move opposite prices, are encouraging investors to ditch high-growth tech stocks, which tend to perform better when bonds are more expensive.
Oil prices, meanwhile, are shooting up, with Brent crude futures, the global benchmark, hitting their highest level in almost three years. US oil futures are also at their highest since October 2018. If the winter is colder than expected, and…
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