European shares slide to 21-month low on mounting recession worries

  • Economy-sensitive sectors lead declines
  • Mowi at STOXX 600 bottom on Norway tax hike plan

Sept 28 (Reuters) – European shares slid 1% on Wednesday, in line with a sell-off in Asian markets, as an intensifying energy crisis in the region and the relentless surge in global bond yields fuelled worries about a recession.

The continent-wide STOXX 600 index (.STOXX) was down 1%, hitting its lowest since late-December 2020, and extending declines to a fifth session.

Germany’s DAX index (.GDAXI) lost 1.2%, taking cues from Wall Street, which sank deeper into a bear market overnight.

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Geopolitical tensions intensified as Europe investigated what Germany, Denmark and Sweden said were attacks on two Nord Stream pipelines at the centre of an energy standoff. read more

A media report said the European Union had threatened a “robust and united response” to probable pipeline attacks.

“Damaging the infrastructures clearly pushes the tensions between the West and Russia to a no-turning point, and dashes hopes of seeing an improvement anytime soon – both on the geopolitical and energy fronts,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.

Reflecting the grim economic outlook, a survey projected German consumer morale would hit a record low in October as high inflation rates and rocketing energy bills show no signs of relenting. read more

Meanwhile, tech stocks (.SX8P) came under pressure as the benchmark 10-year U.S. Treasury yields topped 4%, their highest in 12 years, amid fears the Federal Reserve might have to take rates past 4.5% in its fight against inflation.

“That fear has now gripped the markets and we may see a little more caution going forward as the Fed has made it clear that one inflation reading doesn’t make a trend and it will take a lot more than that to convince it that it can afford to ease off the brake,” said Craig Erlam, senior market analyst, UK & EMEA, OANDA.

“Other central banks may have a lot more work to do; one in particular springs to mind, thanks to the misguided direction the government is taking the country in,” Erlam said, referring to the Bank of England.

London’s blue-chip FTSE 100 index (.FTSE) dropped 1.4% after the International Monetary Fund and ratings agency Moody’s criticised Britain’s new economic strategy. read more

All sectoral indexes on STOXX 600 fell, with the economy-sensitive oil and gas (.SXEP), basic resources (.SXPP), retailers (.SXRP) and banks (.SX7P) sectors down between 1% and 1.8%.

Shares of fish farmers such as Mowi (MOWI.OL), Leroy Seafood (LSG.OL) and SalMar (SALM.OL) dropped between 15% and 20.2% after the Norwegian government proposed a resource tax on salmon and trout farming of 40% from the tax year 2023. read more

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Reporting by Devik Jain in Bengaluru; Editing by Subhranshu Sahu and Savio D’Souza

Our Standards: The Thomson Reuters Trust Principles.

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