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FTSE 100 outperforms as EU gas plan sends European shares lower

·3-min read
The FTSE 100 and European stocks were mixed on Tuesday as the emergency gas plan came into effect. Photo: Reuters/Hannibal Hanschke
The FTSE 100 and European stocks were mixed on Tuesday as the emergency gas plan came into effect. Photo: Reuters/Hannibal Hanschke

European stock markets closed in mixed territory on Tuesday after a European emergency gas plan came into force.

The FTSE 100 (^FTSE) outperformed its peers, up 0.2% after the closing bell, the CAC (^FCHI) was 0.6% lower on the day and the DAX (^GDAXI) dipped 1.2% in Frankfurt.

Under the new European Union gas plan, member states were asked to voluntarily cut gas use by 15% this winter to prepare for a potential Russian cut-off.

Read more: UK energy bills forecast to top £4,200 from January

The move will affect all households, power producers and industry. While the measures would initially be voluntary, the proposal includes a mandatory trigger should the supply situation deteriorate significantly.

It comes after Russia's invasion of Ukraine in February caused a spike in energy prices that is raising the cost of everything from bread to sugar.

A separate analysis from Cornwall Insight predicted UK energy bills will reach £4,266 from January, and £4,427 from April as the cost of living squeezes households.

"The US open has highlighted the growing concerns evident in anticipation of tomorrows CPI reading, while rising energy costs in the UK spell trouble for consumer spending power, said Joshua Mahony, senior market analyst at online trading platform IG.

"US markets have dented confidence this afternoon, with the FTSE 100 providing the one area of strength in an otherwise tumultuous day for equities."

Across the pond, Wall Street fell in the red at the open as traders watched earnings reports and economic figures ahead of key inflation data due later in the week.

Indices have settled into a mixed August lull ahead of the consumer-price data on Wednesday that could set expectations for how the Federal Reserve will approach monetary policy at its next meetings.

The benchmark S&P 500 (^GSPC) lost 0.6% in early trade in New York, the tech-heavy Nasdaq (^IXIC) tumbled 1.5%, while the Dow Jones (^DJI) declined 0.3% at London's close.

Read more: 10 reasons to be bullish on stocks right now, according to JP Morgan

Danni Hewson, financial analyst at AJ Bell, said: "Tomorrow’s inflation data in the US will be closely watched. Investors have had enough of the rising cost of living and any drop in the inflation number will be welcomed by markets. The consensus forecast for July’s data is 8.7% growth year-on-year versus 9.1% seen in June.

"The fact economists are already predicting a slowdown in the rate of inflation means markets could be in for a shock if the inflation figure does not fall to the expected level. Just remember that inflation was higher than expected in both May and June’s readings, so forecasts can only be taken with a pinch of salt."

Asian stocks were mixed overnight amid persistent global cost pressures, with traders turning their focus this week to US inflation data and the prospects for further aggressive Fed interest rate hikes.

In Tokyo, the Nikkei (^N225) was down 0.9%, the Hang Seng (^HSI) closed 0.2% down in Hong Kong and the Shanghai Composite (000001.SS) gained 0.3%.

Watch: Why are gas prices rising?