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FTSE higher as oil slips and European natural gas prices fall

Nord Stream 1 Baltic Sea pipeline. The FTSE was in the red on Thursday
The FTSE was down as natural gas prices dropped back to their levels before the Ukraine war. Photo: AP Photo/Markus Schreiber

European stock markets managed to push higher on Thursday, after a weaker start, as natural gas prices dropped back to their levels before the Ukraine war.

In London, the FTSE 100 (^FTSE) rose 0.2% by the end of the day, underperforming against its continental peers as airline shares were among the top fallers amid a slump in oil prices. Investors were worried about China’s decision to drop COVID restrictions and that it could lead to a new wave of infections.

This dimmed hopes of a recovery in fuel demand for the world’s largest crude oil importer.

Meanwhile the CAC (^FCHI) rose almost 1% in Paris, and the DAX (^GDAXI) was also 1% higher in Frankfurt.

"China’s grand reopening after three years of government-imposed isolation was supposed to be a boon to the global economy, help skirt a deep recession and rescue risk sentiment after a cruel year for an array of financial assets," Stephen Innes, managing partner at SPI Asset Management, said.

"Instead, Xi Jinping’s economically motivated abandonment of strict virus containment protocols is providing markets with an inflation headache and a sense of Deja Vu all over again, smacking weary investors right in the chops.

"With daily infections in China reportedly hitting 40 million and little to no visibility into the state of the nation’s outbreak, health officials in other countries fear an upsurge in cases tied to Chinese travellers, who are now unshackled to fly around the globe."

It came as the month-ahead European gas future contract fell as low as €76.78 per megawatt hour, its lowest level in 10 months, according to Refinitiv data.

This is thanks to warmer-than-normal temperatures this winter, and consumption reduction targets.

UK gas prices have also declined from their highs earlier this year. The day-ahead gas price closed at 155p per therm on Wednesday, compared with 200p/therm at the start of 2022, and over 500p/therm in August.

Watch: Why did gas prices rise?

It comes as industrial action is continuing across Britain today, with the new head of the Trades Union Congress (TUC) warning that further strikes lie ahead in 2023, unless it enters negotiations over pay rises.

Incoming general secretary Paul Nowak said “we must end Britain’s living standards nightmare” – which has been fuelled by higher energy costs – and is also accusing ministers of “sabotaging efforts to reach settlements”.

Read more: Household bills have surged in a year, comparison website says

Across the pond on Wall Street, the S&P 500 (^GSPC) rose 1.8% and the tech-heavy Nasdaq (^IXIC) surged 2.6%. The Dow Jones (^DJI) edged 1.1% higher by the time of the Euopean close.

On Wednesday, US stocks closed down with the S&P 500 and NASDAQ falling 1.2% and 1.35% respectively.

Yesterday’s sell-off went beyond tech shares, with oil company valuations following commodity price downwards, and the US airlines with exposure to winter storm cancellations also having a bad day.

It came as the number of Americans filing new unemployment benefit claims has risen, according to new data.

There were 225,000 fresh ‘initial claims last week, government data shows, an increase of 9,000. this is still a relatively low levels, suggesting the jobs market remained healthy.

Meanwhile, America has joined India, Italy, Japan and Taiwan in requiring COVID tests for travellers from China.

Read more: What to do if you've been mis-sold a job

Stocks in Asia were lower overnight with the Nikkei (^N225) falling 0.9% in Japan while the Hang Seng (^HSI) fell 0.8% in Hong Kong, and the Shanghai Composite (000001.SS) dipped 0.4% on the day.

“China has seen a rise in citizens booking overseas travel following the lifting of quarantine rules on arrival, but it may not be totally plain sailing for Chinese tourists as other countries voice concern on the transparency of data on domestic cases in China,” Derren Nathan, head of equity research at Hargreaves Lansdown, said.

“Japan has imposed new entry restrictions on Chinese visitors and the US will also now require Chinese residents to show a negative test on entry.”

The Russian rouble also fell to an eight-month low against the dollar on Thursday, as Moscow fired 120 missiles at cities across Ukraine, according to officials. It is the biggest wave of strikes in the country for weeks.

The currency dropped to 72.9 roubles to the US dollar this morning, the weakest level since late April. Analysts are predicting that sanctions on Russia’s oil and gas sales will hit export revenues.

Watch: How does inflation affect interest rates?