Europe Markets

European markets close 2% lower as recession fears take hold; oil shares down 6%

Key Points
  • Fears of an impending recession as central banks tighten monetary policy to rein in soaring inflation have continued to induce volatility in global stock markets
  • The Bank of England is due to publish its latest biannual Financial Stability Report on Tuesday. The European Central Bank publishes accounts of its latest monetary policy discussion on Thursday.

LONDON — European stocks closed sharply lower on Tuesday, as global markets failed to cement gains after a bruising week for stocks last week.


The pan-European Stoxx 600 closed down by 2.1% provisionally, with oil and gas stocks falling 6.3% to lead losses as almost all sectors and major bourses slid into negative territory.

The euro also fell to its lowest level in two decades on Tuesday as fears of a recession in the euro zone ramped up, with gas prices soaring and the Ukraine war showing no signs of abating.

The July Sentix Economic Index on Monday showed investor morale across the 19-country euro zone has plunged to its lowest level since May 2020, pointing toward an "inevitable" recession.

In terms of individual share price movement, Dechra Pharmaceuticals added more than 5% after RBC upgraded the British veterinary products company's stock to "outperform."

At the bottom of the European blue chip index, Rheinmetall plunged more than 10% after Deutsche Bank offered a downbeat outlook on the German defense giant's upcoming second-quarter results, due in August.

Shares of Uniper, meanwhile, continued to slide Tuesday amid speculation of a government bailout of the German utilities firm, down more than 9%.

European markets failed to build on solid momentum after the region's indexes closed higher on Monday, albeit wrapping up a quieter day for global markets given the July Fourth holiday in the United States.

Fears of an impending recession as central banks tighten monetary policy to rein in soaring inflation have continued to induce volatility in global stock markets.

U.S. stocks also fell Tuesday. Markets stateside are looking ahead to publication of the U.S. Federal Reserve's minutes from its latest Federal Open Market Committee meeting on Wednesday.

U.S. data releases this week also include the June jobs report on Friday. According to Dow Jones estimates, job growth likely slowed in June, with 250,000 nonfarm payrolls added, down from 390,000 in May. Economists surveyed expect the unemployment rate to hold at 3.6%.

Shares in the Asia-Pacific region closed mostly higher overnight as the Reserve Bank of Australia raised interest rates by 50 basis points to 1.35%, in line with expectations.

Central bank action is also likely to guide market sentiment in Europe this week.

The Bank of England published its latest biannual Financial Stability Report on Tuesday, which outlined a number of risks to the U.K. economy including ongoing disruption to food and energy markets as a result of the Russia-Ukraine war.

"The global economic outlook has deteriorated materially," Andrew Bailey, governor of the BOE, warned in a briefing Tuesday. "It is the right time to lock in resilience so that we are well prepared for future possible shocks." 

Later in the week, the European Central Bank is set to publish accounts of its latest monetary policy discussion on Thursday.

On the data front, June's euro area services PMI (purchasing managers' index) came in at 53.0, slightly above a consensus forecast of 52.8 but down from 56.1 in May.

- CNBC's Ryan Browne and Karen Gilchrist contributed to this report