Eurozone equities bounce from Fed-induced sell-off

Equity markets have been knocked by Federal Reserve boss Jerome Powell's warning that interest rates would continue to rise as policymakers try to tame inflation. ©AFP

London (AFP) - Eurozone stocks rebounded Tuesday from recent losses, but London gains were capped as investors played catch-up after a long weekend.

In midday deals, Frankfurt equities jumped 1.9 percent ahead of key German inflation data and Paris won 1.2 percent.

Both markets had slumped Monday as traders digested Federal Reserve chief Jerome Powell's warning of more interest rate hikes to fight runaway inflation.

London eked out gains on Tuesday after a public holiday closure the day before, while the euro held above one dollar.

Sentiment had soured late Friday after Powell indicated more monetary tightening was needed to bring inflation down from four-decade highs, news that sent Wall Street into a tailspin.

Positive note

"European markets have started the week on a positive note following Friday's sell-off on Wall Street after Powell struck a hawkish tone," said Interactive Investor analyst Victoria Scholar on Tuesday.

"US futures are pointing to a bounce back, as markets look set to regain some lost ground."

German inflation data is expected to show how the ongoing energy crisis has further stoked price pressures in the eurozone's powerhouse economy.

Natural gas prices however dipped Tuesday despite jitters over supply disruptions from key producer Russia.

Europe's benchmark Dutch TTF gas contract slid to 259.405 euros per megawatt hour, having stuck a March peak late on Friday.

French energy firm Engie said Tuesday that Russian energy giant Gazprom was slashing its natural gas deliveries "due to a disagreement between both sides over the execution of contracts".

Engie added in a statement that Russian gas supplies had already been reduced drastically after Russia invaded Ukraine in February.

Many European countries are facing severe supply problems as Moscow turns off the gas taps in response to EU military and diplomatic backing for Ukraine.

Asian stocks indices diverged on Tuesday, winning limited support from bargain-buying.

Confidence remains at a premium as traders contemplate the prospect of more Fed rate hikes and a possible recession.

Oil tanked Tuesday on fears about a major hit to demand from any global economic slowdown -- and news of more Covid restrictions in key consumer China.