FTSE and European stocks close mixed as German recession fears weigh

·3-min read
The FTSE 100 and European markets were mixed as German recession fears weigh. Photo: Axel Heimken/AFP via Getty
The FTSE 100 and European markets were mixed as German recession fears weigh. Photo: Axel Heimken/AFP via Getty

European stocks were mixed on Monday after high energy prices and looming gas shortages pushed Germany closer to recession amid an ominous global economic outlook.

In London, the FTSE 100 (^FTSE) closed 0.3% higher as a big week for company results kicks off. The CAC (^FCHI) rose 0.2% in Paris and the DAX (^GDAXI) tumbled 0.6% in Frankfurt.

It comes as business confidence in Europe's largest economy fell to its lowest level for more than two years as the Russian gas crisis and soaring prices push Germany to the edge of recession.

The German Ifo Business Climate Index fell sharply to 88.6 points this month, from 92.2 points in June as firms became more gloomy about both their current situation and the outlook for the next six months.

"Higher energy prices and the threat of a gas shortage are weighing on the economy," said Clemens Fuest, president of Ifo. "Germany is on the cusp of a recession."

Joshua Mahony, senior market analyst at online trading platform IG, said: "Economic worries and rising rates look set to bring further market jitters, while UK banking stocks push higher ahead of their latest earnings.

"In Europe, the latest German Ifo survey highlighting that the country is on the brink of an energy-driven recession.

"While gas does flow into Germany via the Nord Stream 1 pipeline once again, it appears that the pre-maintenance 40% flow level has now dropped to just 20% in a fresh knock an already troubled German economic outlook."

Read more: Ryanair warns new COVID variants will hit airlines and travel plans

Across the Atlantic, Wall Street indices traded in mixed territory after weak corporate earnings reports spooked investors the week before and ahead of the latest Federal Reserve rates decision.

The tech-heavy Nasdaq (^IXIC) fell 0.3%, while the benchmark S&P 500 (^GSPC) added 0.2%, and the Dow Jones (^DJI) jumped 0.3% at London's close.

All eyes will be on the Fed’s interest rate decision and the second quarter gross domestic product data due later this week.

Michael Hewson, chief market analyst at CMC Markets, said: "This late Friday weakness appears to have sharpened concerns that it might be a forewarning of similar disappointments as we look towards the likes of Google owner Alphabet (GOOGL), and Facebook owner Meta Platforms (META) who report their numbers later this week, starting with Alphabet tomorrow.

"There is also the not insignificant matter of the latest US central bank rate decision which is expected to see the Federal Reserve raise interest rates by another 75bps on Wednesday, following on from the 75bps in June."

Asian stocks were in the red overnight with the Nikkei (^N225) down 0.8% in Tokyo. In Hong Kong, the Hang Seng (^HSI) dipped 0.4%, while the Shanghai Composite (000001.SS) declined 0.6%.

Watch: What is a recession and how do we spot one?

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting