European markets mixed as Germany triggers emergency gas plan

European stocks opened mixed on Wednesday as Germany declares an “early warning” for gas emergency as a Russia deadline to pay for supplies in rubles looms.

The FTSE 100 (^FTSE) pushed higher at the open after a rally on Tuesday after the UK said it keeping a cautious stance despite a glimmer of progress in Russia and Ukraine peace talks. The bluechip index rose over 0.1% to 7.547 points.

Britain’s deputy prime minister Dominic Raab said that the UK will judge Russia on its action and not words after the Kremlin said it would scale down military operations around Kyiv.

“The door to diplomacy will always be left ajar, but I don’t think you can trust what is coming out of the mouth of Putin’s war machine,” Raab told Sky News.

Elsewhere in Europe, France’s CAC (^FCHI) was 0.4% lower after the opening bell and the DAX (^GDAXI) lost 0.6% in Germany.

It comes after Germany activated an emergency gas plan as Russian president Vladimir Putin threatened to cut supplies if payments are not made in rubles, something which the G7 has rejected. Russia is attempting to prop up the currency after economic sanctions sent it crashing.

German economy minister Robert Habeck urged firms and consumers to reduce energy consumption wherever possible but said there was currently no supply shortage. Habeck said the country was monitoring flows with market operations.

Neil Wilson, chief market analyst at Markets.com, said: “Equity markets clearly got a lift from the headlines suggesting that Russia was scaling back military operations around Kyiv and Chernihiv, we await to see what really happens on the ground.

“After a strong run over the last two sessions, European equities are softer in early trading this morning. Losses are under 1% at the open, after the CAC rose 3% and the DAX advanced 2.8% on Tuesday.”

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While crude extended losses, prices clawed back heavy losses on Wednesday, amid tight supply and the likelihood of additional Western sanctions against Russia even as the latest round of peace talks between Moscow and Kyiv seemed progressive.

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Brent crude (BZ=F) rose 2.4% to $112.85 a barrel. US light crude (CL=F) was 2.7% higher to $107 in electronic trading on the New York Mercantile Exchange at the time of writing.

Across the pond, US benchmarks are on track to finish March in the green after another rally on Wednesday despite Treasury yields flashing a recessionary warning sign.

Wall Street’s S&P 500 (^GSPC) advanced 56.08 points, or 1.2%, to 4631.60, notching its largest one-day percentage gain since June 2020. The tech-heavy Nasdaq (^IXIC) increased 1.8%. The Dow Jones (^DJI) added 1%.

In government bond markets, the US two-year yield briefly surpassed the 10-year note (^TNX) on Tuesday for the first time since 2019. Typically, government bonds with longer terms offer higher yields. The move is historically a tracked as a predictor of a recession, as well as a gauge of future interest rates and underpins global borrowing costs.

“An inverted yield curve of this sort is usually a pretty good recession indicator for the US; in 50 years it’s never missed. Typically, it takes about 18 months to come good,” said Wilson.

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Overseas markets rebounded following a strong bounce on Wall Street and a surge in Europe on hopes of a resolve in the Ukraine conflict. The MSCI’s broadest index of Asia-Pacific (AAXJ) shares excluding Japan was up 1.8%.

Asian stocks were mixed overnight with the Nikkei (^N225) bucking the trend, declining 0.8% in Japan, while the Hang Seng (^HSI) edged 2% higher in Hong Kong and the Shanghai Composite (000001.SS) gained 1.8%.

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