[MARKET ANALYSIS] European bourses remain under pressure, Utilities hit further as QatarEnergy halts production; US equity futures reverse Monday's gains

• European bourses (STOXX 600 -2.5%) continue to selloff as risk tone remains sour, with participants using this opportunity to profit from the trend higher, which is also exacerbating losses. Banks remain the hardest-hit, affecting the FTSE MIB (-3.3%) and IBEX 35 (-3.4%) the most. The broader STOXX 600 has now dipped below the 50SMA at 611.7, the index closed at 633.9 only two days ago.
• Unlike Monday, in which Energy (-1.0%) was supported by the higher oil prices, all sectors are in the red. As stated above, Banks (-3.4%) and Insurance (-3.6%) are the worst performing sectors due to the effects of higher oil on growth and the increased war-risk claims. Surging Nat Gas prices have failed to support Utilities (-3.7%), due to the energy disruption caused by QatarEnergy (which accounts for nearly 20% of global LNG trade) stopping the production of LNG.
• The effects of the conflict in Iran has been the key focus for investors. Economists at Goldman Sachs note that the increase in energy prices is the most relevant channel of transmission to growth, inflation and monetary policy. This is due to most European countries being net oil and gas importers. The bank estimates that 4-quarter effects of a 10% increase in energy prices on real GDP is -0.2% in the Euro area and the UK, while headline inflation could rise between 0.15-0.3%.
• Lottomatica (+5.6%) is among the biggest outperformers today. The gaming operator saw revenue rise 14% on an annual basis and raised its dividend by EUR 0.30.
• US equity futures (ES -1.5%, NQ -1.9%, RTY -2.3%) are following their European peers, despite managing to close Monday with gains.

European markets are under significant pressure, driven by elevated geopolitical risks related to the conflict in Iran and the impact of QatarEnergy halting LNG production, disrupting supply and sentiment. This turmoil is negatively affecting banks and utilities while supporting commodities prices, and analysts from Goldman Sachs highlight a potential GDP decline and inflation increase resulting from rising energy costs, which is a critical factor for monetary policy considerations. As US equity futures reflect that sentiment, expect continued volatility as market participants assess the implications for growth and inflation across both regions.