Europe enters autumn on edge as gas prices soar and stocks hit record seasonal low
Europe begins autumn with gas prices at 3-1/2-year highs and stocks at record seasonal lows, while global bond yields surge on fiscal and inflation concerns.
Europe is heading into autumn on shaky ground, with benchmark gas prices at their highest level in three and a half years and stocks at their lowest ever for this time of year, according to records stretching back to 2011.
The energy crunch has been worsened by a scramble for gas after disruptions to Qatar's supply linked to the Iran war. This has deepened a market condition known as "backwardation," where near-term prices exceed those for winter delivery. As a result, there is little economic incentive to stockpile gas now, leaving Europe dependent on mild winter weather following an unusually hot summer.
Bond markets are also reflecting the strain. Bund futures are trading at 15-year lows in Asia, while French OAT futures have fallen to their lowest since their 2012 launch. French and German yields touched 15-year highs on Monday, driven by mounting fiscal pressures in both countries. European inflation data due later in the session is expected to reinforce market bets on a rate hike by the European Central Bank next week.
Across the Atlantic, US President Donald Trump has threatened further strikes against Iran following the first exchange of fire in a month. Treasury yields continued their upward march in Asian trading, with the 10-year yield hitting a 20-month high in Tokyo. Japan's 10-year benchmark yield also touched 3% for the first time since 1996.
Equity markets in Seoul, Tokyo, Sydney, and Hong Kong all fell. In a notable debut, shares of fashion giant Shein Global dropped 8% on their first day of trading after an IPO that had already been priced at a discount due to growth and regulatory concerns.
Some analysts point out that much of the rise in global bond yields stems from higher real yields, which could reflect improving growth expectations rather than purely negative signals for stocks. However, there is also a worrying increase in term premia. According to a New York Fed measure, the 10-year Treasury term premium more than tripled from around 26 basis points in January 2025 to over 80 basis points by June.
Since the end of June, nominal 10-year Treasury yields have climbed about 36 basis points, while breakeven inflation expectations rose only 9 basis points, suggesting a mix of higher term premium and real yield pressures.
Key data and events to watch on Tuesday include Euro zone CPI, US JOLTS job openings, and ISM Manufacturing figures, along with earnings from Dell and Palo Alto Networks.