Yahoo Finance European stock markets sink in red as storm Eunice batters Britain
European stock markets closed in the red on Friday as storm Eunice battered Britain, driving down power prices and lifting wind turbine output to some of the highest levels ever seen.
Domestic day ahead prices fell 11% to £140 ($191) per megawatt-hour. German prices declined as much as 66% to its lowest level this year, with wind output from wind farms in the country set to double by Saturday morning, according to Bloomberg estimates.
The Met Office issued a second rare red weather warning on Friday to cover London, the south east and the east of England. A red warning — meaning there is a danger to life from flying debris — is also in place for parts of south west England and south Wales. All trains in Wales are suspended and hundreds of schools will be closed, while the military is on stand-by.
But the strong winds hitting the UK and parts of Europe will provide some much needed relief to strained energy markets, which have relied heavily on coal and gas amid a supply crunch.
In the UK, wind is now making up 30% of all power generation thanks to storm Eunice that's whipped up record gusts of up to 122 miles per hour — the biggest gust ever recorded in England.
The FTSE 100 (^FTSE) closed 0.3% lower as new data showed UK retail sales grew faster than anticipated in January. Figures from the Office for National Statistics (ONS) suggest that inflation has not massively impacted consumer spending yet, with the volume of goods sold online and in-store rising 1.9% and providing a much-needed rebound from the Omicron induced 4% knock in December.
But, experts expect consumers to tighten their purse strings in the coming months as inflation is set to peak at 7%, and households face higher energy bills and tax rises in April.
“Retailers will be acutely aware that the cost of living squeeze could see consumers scrutinising their spending more over the coming weeks and months, impacting trade,” said Paul Martin, UK head of retail at KPMG.
“As is the case for consumers, retailers also face inflationary pressures. Businesses have challenging decisions to make about how to absorb those, or how to pass them on without losing custom.”
The growth came despite UK consumer price inflation edging up to a new 30-year high of 5.5% earlier this week.
Elsewhere in Europe, France’s CAC (^FCHI) edged over 0.3% lower and the DAX (^GDAXI) was down 1.5% in Germany.
It comes after figures showed eurozone production slumped at the end of 2021 as rising COVID infections hit the economy. Production fell across the construction sector fell by 4% month-on-month in the euro area, and by 3.1% in the wider EU.
Read more: UK consumer prices hit new 30-year high as inflation rises to 5.5%
Major benchmarks in the US opened mixed on Friday as traders keep a wary eye on the latest developments in the Ukraine crisis, after US president Joe Biden warned on Thursday that Russia was on the brink of invading Ukraine within “several days”.
Analysts say risk assets have faced sensitivity on Ukraine-Russia headlines over the past 24 hours as fears of military escalation resurfaced. But, despite recent market volatility its "important to remember that we are still in an environment of robust economic and earnings growth," said Mark Haefele, chief investment officer at UBS Global Wealth Management.
Haefele added that the Swiss bank expects "upside for equity markets over the balance of the year".
However, investor fears over a Ukraine standoff could be alleviated after the Kremlin and the US agreed to talks next week. US secretary of state Anthony Blinken accepted an invitation from Russia’s foreign minister Sergey Lavrov to meet next week, provided there is no further Russian intrusions into Ukraine.
The tech-heavy Nasdaq (^IXIC) was over 1% lower on close in London, while Wall Street’s blue-chip S&P 500 (^GSPC) fell 21.25 points, or over 0.5%, to 4359.01.
The Dow Jones (^DJI) fell 0.3% after suffering its steepest one-day loss of 2022 on Thursday at the close, dropping over 600 points, or 1.8%, to 34312.03.
“It is becoming increasingly clear that the US appears to think a Russian invasion is only a matter of time, and whether it comes this week, or in a few days, US officials want it to be clear that if, and when it does happen, Russia won’t be able to hide behind a “false flag” event to justify it,” Michael Hewson, chief market analyst at CMC Markets said.
Read more: National Grid share price rises as Macquarie aims for £7.3bn stake in gas unit
Natural gas (NG=F) prices also reversed, declining 0.8% on expectations of fresh talks between the countries over, reducing worries of supply shortages.
Oil prices and yields on government bonds also fell. The 10-year US treasury yield (^TNX) retreated to 1.97% on Thursday from 2.04% on Wednesday.
The oil rally looks to be losing steam as traders weigh ongoing tensions between Russia and Ukraine with the possibility of an Iranian nuclear deal after surging to seven-year highs earlier in the week.
Brent (BZ=F) hovered above $90 (£66.11) per barrel, falling 1.9% to $91.37, while Crude oil (CL=F) slid over 2% to $89.87pb,
Overseas, the pan continental Stoxx Europe 600 (^STOXX) declined 0.7%.
Asian markets also declined following the steep drop on Wall Street and geopolitical tensions but hopes of talks between the nations have softened the blow as the prospects of a war diminish.
The Shanghai Composite (000001.SS) was up 0.7%. The Hang Seng (^HSI) fell 1.9% while the Nikkei (^N225) declined over 0.4% in Japan.
