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RSM Chief Economist Joseph Brusueras: Warsh delivered the right hawkish signals at the press conference and attempted to reinforce the Fed’s credibility in restoring price stability, while also enhancing his own credibility.U.S. stocks continued to decline after the Walsh press conference, with the S&P 500 falling 1%, its biggest drop since July 29, the Dow Jones Industrial Average down 1.65%, and the Nasdaq Composite down 0.6%.On September 17th, Federal Reserve Chairman Warsh declined to answer questions at a press conference regarding his interactions with US President Trump. Trump has been calling for lower interest rates in recent months. Warsh stated, "I have no comment on my discussions with the president." White House Council of Economic Advisers Chairman Christopher Phelan said on Tuesday that raising interest rates would be a "mistake."On September 17th, Federal Reserve Chairman Warsh stated that he would not disclose details of future interest rate decisions by the Federal Open Market Committee (FOMC). He said, "I am not responsible for providing forward guidance. Our decision today (to raise interest rates) is a carefully considered, serious, and responsible one. We have been preparing for and thinking about this decision for the past 110 or 120 days." Warsh also stated that this decision was not market-driven. He said, "Our decision today is based on our assessment of the current situation, our judgment of the employment trend, and our assessment of the strength of the economy. Sometimes, the market tries to anticipate our decisions. I watch market prices to see what information the market is sending. But todays decision is our own."On September 17th, Warsh stated that while the Federal Reserve cannot prevent price shocks in commodities such as oil on its own, the central bank can use policy tools to prevent further spread of inflationary pressures. Warsh said, "We cannot influence the price of any single commodity, such as oil or groceries." However, he pointed out, "We can and will ensure that any changes in relative prices do not spread further, and do not have second- or third-order effects on the economy. Thats our responsibility, and thats what were doing." Warsh made these remarks as U.S. diesel prices hit a record high due to the Iran war.

European gas prices increase as a result of Russia's shutdown of the Nord Stream pipeline

Charlie Brooks

Sep 06, 2022 11:24

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European natural gas futures soared at the start of trade on Monday after the Russian gas monopoly Gazprom (MCX:GAZP) shut down the Nord Stream pipeline to Germany, stoking fears of a complete halt in Russian supply over the winter.


The front-month Dutch TTF contract, which serves as a benchmark for northwest Europe, reached a high of 31% before retreating slightly to trade at 263 euros per megawatt-hour as of 03:25 ET (07:25 GMT). This marks an increase of 22.5% from Friday's closing price.


Gazprom's action was the second major escalation in the economic confrontation sparked by Russia's invasion of Ukraine on Friday. The corporation announced its news immediately following the close of natural gas trade in Europe, and only hours after G-7 finance ministers agreed on a long-awaited plan to place a price ceiling on Russian oil exports in an effort to cut off the flow of funding to President Vladimir Putin's government.


Prior to the suspension, Nord Stream was transporting roughly 30 million cubic meters of gas per day, or nearly 20% of its official capacity. This loss makes it more difficult for European utilities to continue filling their storage tanks before the winter heating season.


Despite the fact that storage levels in the Euro area have increased significantly in recent weeks as a result of rising imports of liquefied natural gas, the focus this week will be on the possibility of rationing and additional measures to control demand for gas and electricity costs, according to Saxo Bank strategists. "Demand destruction due to high pricing has already reduced demand, but more must be done, particularly if the upcoming winter is cold.


Germany placed a windfall tax on electricity generators to fund a 65 billion euro rescue plan for consumers suffering unmanageable increases in their bills, while Finland and Sweden launched emergency packages to avert the collapse of energy enterprises as the price of supplies surged.


Given that a substantial amount of Europe's marginal capacity - where output can be easily modified to match natural changes in demand - is gas-powered, gas prices have played a big influence in the increase in electricity prices. On Friday, EU energy ministers will meet to discuss plans to decouple electricity and gas prices, among other topics.


Holger Schmieding, chief economist at Berlin's Berenberg Bank, stated in a client note that the closing of Nord Stream suggests that the euro zone, "and Germany in particular," will see higher inflation and a more severe recession than the European Central Bank and private economists forecast.


At the opening bell on Monday, all European assets reflected this pessimism, with the euro plunging to a new 20-year low of $0.9877 before recovering to $0.9911, a 0.4% decrease. Due to its large weighting of energy-sensitive businesses, the STOXX 600 sank 1.6% while the German DAX fell 3.0%.

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