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European gas prices rise after Russia threatens to cut supplies

by SuperiorInvest

European gas prices rose on Wednesday after Russia warned it could cut supplies to Western Europe as early as next week, unsettling energy markets ahead of winter.

TTF, the regional gas benchmark, rose as much as 6 percent to 132 euros per megawatt hour in early London trading, extending Tuesday’s 9 percent gain after Russia’s Gazprom accused Ukraine of taking gas destined for Moldova. As a result, Russia has threatened to cut flows through the one remaining gas pipeline to Western Europe.

The wholesale price of gas in Europe fell sharply from an all-time high of around €310 per megawatt-hour in August, mainly due to limited industrial demand, higher-than-expected supply and lower domestic consumption. However, Gazprom’s move will raise concerns about Europe’s energy supplies for the colder months.

Oil prices rose on Wednesday, with Brent crude, the international benchmark, up 0.7 percent at $88.96. West Texas Intermediate, the U.S. benchmark, added 0.6 percent to $81.50.

In stock markets, Europe’s Stoxx 600 opened 0.7 percent higher and London’s FTSE rose 1 percent. Contracts tracking Wall Street’s S&P 500 index and the tech-heavy Nasdaq 100 rose 0.1 percent.

The US Thanksgiving holiday, as well as the World Cup in Qatar, sapped “liquidity and energy” from markets, said Kit Juckes of Société Générale. Still, US stocks gained ground in the previous session.

Wednesday’s release of minutes from the Federal Reserve’s November meeting will have investors scrutinizing for signs of where US monetary policy might be heading. Markets are pricing in a 77 percent chance of a 0.5 percentage point interest rate hike in December, potentially ending four consecutive 0.75 percentage point hikes.

Cooler-than-expected price growth in November was enough to convince some investors that inflation had peaked, yet statements by Fed officials suggested the central bank could keep interest rates high for longer than markets expect.

The dollar has rallied ahead this year, but fell 4 percent against a basket of six peers in November as investors bet U.S. interest rates were near a peak. The currency fell another 0.3 percent on Wednesday.

In government bond markets, the two-year Treasury yield, which is particularly sensitive to interest rate expectations, rose 0.02 percentage point to 4.54 percent. The benchmark 10-year Treasury yield added 0.01 percentage point to 3.77 percent. Revenues rise as prices fall.

In Asia, Hong Kong’s Hang Seng gained 0.6 percent, while China’s CSI 300 added 0.1 percent. Elsewhere, Japan’s Topix rose 1.2 percent and South Korea’s Kospi rose 0.5 percent.

The moves come as Covid-19 cases in China soar to record highs, leaving large parts of the country under lockdown.

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