Energy crisis tearing through global stock markets leaves a trail of losers

The energy crisis that’s sent inflation soaring across the world is getting worse each week, leaving stock traders with a challenge to figure out where to put their money.

The nightmare scenario that’s developed this year has already walloped equities, which suffered a bruising first half. A rally over the summer helped to reduce losses, but the worsening crisis, which appears nowhere near over, is putting up a huge hurdle to further gains. The surge in power prices, along with threats to supply, is affecting businesses from China to Germany to the US.  

Germany’s heavy reliance on Russian fuels has left its corporate heavyweights particularly vulnerable. A Citigroup basket of stocks sensitive to a gas shock that includes Covestro, Thyssenkrupp and Siemens  has underperformed Europe’s broader Stoxx 600 market this year.  As the squeeze intensifies, retail looks like another loser. In the US last week, two big names reminded investors that any worries are well founded. Nordstrom plunged 20 per cent on one day alone after slashing 

its full-year outlook, while Macy’s also cut its forecast. In the UK, a retail stock gauge has slumped about 35 per cent so far this year.

“The energy crisis brings a huge amount of unknowns and concerns in the market,” said Clive Burstow, Barings’ London-based head of global resources. “High prices are driving inflation and pushing industrial capacity offline, which is worsening an already constrained supply chain.”

The inflation surge has also prompted an aggressive response from the world’s major central banks.