European markets tumble on inflation fears and soaring oil and gas prices

European stock markets slumped on Wednesday morning amid inflation fears as US crude oil hit a seven-year high.

In London, the FTSE 100 (^FTSE) fell more than 1.2% after opening, trading below the key 7,000 points mark, while the French CAC (^FCHI) tumbled more than 1.3% and the DAX (^GDAXI) was also almost 1.3% lower in Germany.

It came as US crude reached its highest level since 2014, extending its recent rally due to tight supplies, rising demand, and soaring gas prices. European natural gas climbed to fresh highs yet again on Wednesday.

A barrel of US crude touched $79.40, while Brent crude (BZ=F) hit a three-year high of $83 per barrel.

“I think rallying crude oil are driving stagflation concerns for a large part – especially for emerging market economies who are also net oil importers. India and China to name a couple,” Fawad Razaqzada, market analyst at Think Markets, said.

“Even in the more advanced economies, rising crude oil prices have raised fuel prices, directly impacting consumers’ disposable incomes.

“The other factors are driven by other energy prices – most notably gas, but also surging electricity prices – as well as supply-chain bottlenecks – the latter raising both inflation and hurting economic growth.”

Meanwhile, German industrial orders tumbled 7.7% in August, as supply bottlenecks and shortages hit factories.

Europe’s largest economy suffered during the month after two months of strong gains. The figures came in much worse than the 2.1% fall which analysts expected.

Car and car part manufacturers were the worst hit, with orders down 12% on the previous month.

Watch: European gas prices hit all-time high

Across the pond, S&P 500 futures (ES=F) were down 0.7%, Dow futures (YM=F) shed 0.6%, and Nasdaq futures (NQ=F) were 0.9% lower as trade began in Europe.

Asian stocks moved mostly lower overnight on the back of higher energy prices and inflation concerns.

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In Tokyo, the Nikkei (^N225) fell more than 1%, extending losses for an eighth consecutive session, while the Hang Seng (^HSI) dipped 0.4%. The Shanghai Composite (000001.SS) is closed until Friday due to a holiday.

Traders remain concerned that new Japanese prime minister Fumio Kishida could be outlining a redistribution plan that includes higher taxes, including on capital gains.

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Elsewhere, the Bank of New Zealand hiked interest rates for the first time in seven years in a bid to contain rising inflation. The Reserve Bank of New Zealand (RBNZ) increased its cash rate by a quarter of a percentage point to 0.5%.

“The committee noted that further removal of monetary policy stimulus is expected over time, with future moves contingent on the medium-term outlook for inflation and employment,” the RBNZ said.

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