European stock markets weakened sharply Wednesday on concerns that high inflation, fed by increasing energy costs, will force central banks to tighten monetary policy faster, choking off the post-pandemic recovery.
German factory orders, a normally reliable leading indicator of trends in Europe's largest economy, set the negative tone with a shock 7.7% decline in August, a sharp slowdown from the 4.9% gain in July. The slump was caused largely by the key automotive sector, which has repeatedly flagged problems with its supply chain this year.
European investors had already received a weak handover from Asia, after New Zealand's central bank hiked interest rates by for the first time in seven years in an attempt to get on top of inflationary pressures, and signalled further tightening was to come. In Europe, Romania had become the latest emerging country to hike on Tuesday and Poland is expected to follow suit on Thursday.
Energy markets continue to create headaches for industry, with U.K. gas prices hitting a new all-time high of 330 pence a therm, around 97 euros a megawatt-hour.
Oil also traded at multi-year highs amid global concerns about energy supply, particularly after the so-called OPEC+ bloc decided against speeding up a pre-agreed pace of output increases.
By 3:40 AM ET, U.S. crude futures traded 0.4% higher at $79.28 a barrel, having earlier climbed to its highest level since November 2014. The Brent contract rose 2% to $82.91, after rising to a three-year high in the previous session.
In corporate news, Tesco (OTC:TSCDY) stock soared 4.8% after the U.K. supermarket chain raised its full-year outlook as it reported a 16.6% rise in first-half core retail profit. It also announced a share buyback, with the first tranche of 500 million pounds in shares to be bought by October 2022.
Bayer (DE:BAYGN) outperformed, holding steady after a judge ruled that its Roundup weedkiller wasn't the cause of a boy's rare form of cancer - a welcome win in a series of largely unsuccesful legal battles over the product.
On the flip side, Tui (DE:TUIGn) stock fell 0.9% after the travel company said it would raise 1.1
billion euros ($1.27 billion) in equity to help pay down its pandemic debt.