European stocks rise as tightening oil market boosts crude prices

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European stocks rebounded from four successive days of losses on Monday as rising global crude and gas prices bolstered energy companies.

The region-wide Stoxx Europe 600 rose 0.6 per cent in the first hour of trade while France’s Cac 40 gained 0.9 per cent and Germany’s Dax advanced 0.7 per cent. 

Energy stocks led gains in the region, rising 1.3 per cent, as crude oil prices strengthened from Opec+ data indicating global supply was beginning to tighten. Lower exports from Saudi Arabia and Russia have helped temper worries about flagging global demand amid high interest rates.

The international benchmark Brent crude climbed 0.9 per cent to $85.58 a barrel, while US West Texas Intermediate was up 1 per cent at $82.04 a barrel.

The rally in energy stocks offset traders’ concerns over China’s slowing economy, which were reignited on Monday after the latest policy decision by the country’s central bank undershot market expectations.

The People’s Bank of China lowered its one-year loan prime rate, a reference for bank lending, by 10 basis points to 3.45 per cent but opted to keep the equivalent five-year rate steady at 4.2 per cent.

The move was the latest in a string of policy decisions that have fallen short of expectations, as economists polled by Bloomberg had unanimously projected 15 basis point cuts to the one-year and five-year rates.

China’s benchmark CSI 300 dropped 1.4 per cent, reaching its lowest level since November last year, while Hong Kong’s Hang Seng was down 1.8 per cent.

The renminbi dropped as much as 0.4 per cent following the announcement, trading at Rmb7.3075 against the dollar.

Investor calls for sweeping government support measures come at a time of heightened anxiety over China’s economy, which has struggled to regain momentum since the start of the year, when it reopened after a prolonged period of strict pandemic lockdowns.

Recent data releases have signalled that the world’s second-largest economy is slipping into deflation, while its exports have dropped and youth unemployment has soared, prompting the government to stop publishing the statistic altogether.

China’s slowdown is set against the backdrop of stubborn inflation in the US and Europe, which is stoking fears that global central banks will keep interest rates elevated for longer.

European natural gas futures rose 5.2 per cent to €39.50 per megawatt hour as investors grew concerned that global gas supplies would be disrupted if unions at liquefied natural gas producers in Australia went ahead with a strike this week.

Global stocks clocked their biggest weekly drop since March last Friday after robust US economic data stamped out hopes that the Federal Reserve — which lifted interest rates to a 22-year high over the past year — would start cutting rates soon.

Contracts tracking Wall Street’s benchmark S&P 500 rose 0.1 per cent, while those tracking the tech-focused Nasdaq 100 advanced 0.2 per cent ahead of the New York open.