Crude oil prices surge, driving European stocks higher

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European stocks rebounded on Monday after experiencing losses for four consecutive days, thanks to increasing global crude and gas prices that supported energy companies.

In the initial hour of trade, the region-wide Stoxx Europe 600 rose by 0.6%, France’s Cac 40 gained 0.9%, and Germany’s Dax advanced by 0.7%.

Energy stocks were the primary drivers of these gains, rising by 1.3%, as crude oil prices strengthened due to Opec+ data indicating tighter global supply. Concerns regarding declining global demand amid high interest rates were mitigated by lower exports from Saudi Arabia and Russia.

The international benchmark for crude oil, Brent, increased by 0.9% to $85.58 per barrel, while US West Texas Intermediate rose by 1% to $82.04 per barrel.

Although traders were worried about China’s slowing economy, these concerns were overshadowed by the rally in energy stocks. The latest policy decision by the People’s Bank of China, which fell short of market expectations, reignited concerns about the country’s economic slowdown.

The bank lowered its one-year loan prime rate by 10 basis points to 3.45%, while keeping the five-year rate steady at 4.2%. Economists surveyed by Bloomberg had unanimously projected 15 basis point cuts for both rates.

China’s benchmark CSI 300 dropped by 1.4%, reaching its lowest level since November last year, while Hong Kong’s Hang Seng declined by 1.8%.

Following the announcement, the renminbi dropped by as much as 0.4%, trading at Rmb7.3075 against the dollar.

At a time of heightened anxiety over China’s economy, investor calls for extensive government support measures are increasing. China’s economy has struggled to regain momentum since reopening after strict pandemic lockdowns earlier this year. Recent data releases indicate a potential deflationary trend, with declining exports and soaring youth unemployment.

China’s slowdown occurs amid persistent inflation in the US and Europe, fueling concerns that global central banks will maintain elevated interest rates for a longer period.

Investors grew concerned about potential disruptions in global gas supplies, causing European natural gas futures to rise by 5.2% to €39.50 per megawatt hour. These concerns stem from the possibility of a strike by unions at liquefied natural gas producers in Australia.

Last Friday, global stocks experienced their largest weekly drop since March, following robust US economic data that dashed hopes of the Federal Reserve cutting rates soon. Contracts tracking Wall Street’s S&P 500 rose by 0.1%, while those tracking the tech-focused Nasdaq 100 advanced by 0.2% ahead of the New York open.