European stock markets are sharply lower due to the relaunched gas price that is hitting the European economy. The euro stoxx 600 is in its worst year since the 2008 financial crisis.
Industrialists speak of irreversible damage to European industry, while European energy ministers will not meet until Friday. The split between a bleeding economy and a Europe that is taking its time only exacerbates the malaise. All European indices are 1 to 2 percent in the red. The Bel20, together with the French and Dutch stock exchanges, is among the strongest decliners.
The stock markets immediately plunged into the red from the opening as a result of the sharp rise in gas prices. In Brussels, industrial and financial stocks in particular fell. Solvay and Aperam were among the biggest losers. Their industrial installations are particularly energy-intensive, increasing their costs. Aperam previously shut down its stainless steel factory in Genk. The expensive production costs also coincide with a drop in demand and order books coming under pressure. A problem for Europe is that the energy shock is much more limited in other parts of the world.
Financial stocks, on the other hand, are falling again for fear of the economic downturn. A recession results in more defaults. In Brussels, this mainly puts pressure on KBC Group, which has an important second home market in Central Europe. Growth stocks are also taking a hit.
The energy crisis overshadows the decision that the European Central Bank (ECB) must make on Thursday. The ECB is expected to raise interest rates by 0.50 or even 0.75 basis points. Some economists expect the European deposit rate to reach 1.50 to 1.80 points by the end of this year. This while the recession is expected to manifest itself mainly in the fourth quarter and 2023 will also be a lost year for the European economy.
In the Bel20, the index of the 20 most important stocks, not a single stock is in the plus. Since the start of the year, the Bel20 has been around 17.5 percent lower. It is a painful awakening, especially for investors who rediscovered the stock market very late after years of barely receiving interest on their savings.
The euro stoxx 600, the index of 600 most important companies, has been trading up to 16 percent in the red since the start of the year. That is the biggest drop since 2008, when the financial crisis brought down the banking system.
Not only are European equities losing ground, the euro also remains under pressure with a price of $0.99. It is the first time in two decades that the euro has been so weak against the dollar. A weak euro is theoretically good for exports, but today it mainly makes imports more expensive, so it puts even more pressure on the inflation problem.