European markets mixed as Germany’s DAX hits record high; Oil and gas stocks down 3%

Oil and gas stocks were 3% lower at 9:45 a.m. in London, after the International Energy Agency said the oil market was facing a “sizeable surplus” next year.

In its monthly report, published Tuesday, the IEA said heightened oil supply security concerns due to Middle East tensions were playing out against a global market that “looks adequately supplied.”

“OPEC+ spare production capacity stands at historic highs, barring the exceptional period of the Covid-19 pandemic… global oil stocks provide a further buffer,” it said.

“For now, supply keeps flowing, and in the absence of a major disruption, the market is faced with a sizeable surplus in the new year.”

The agency forecasts world oil demand will expand by just under 900,000 barrels a day in 2024 and by 1 million barrels a day in 2025, down from the 2 million barrels a day recorded across 2022 to 2023.

Oil prices fell Tuesday as investors also considered a report in the Washington Post that eased fears that Israel might attack Iranian oil facilities.

— Jenni Reid

The U.K. labor market snapshot released by the Office of National Statistics on Tuesday is broadly supportive of a Bank of England rate cut in November, according to analysts.

Wage growth met forecasts and slowed to the lowest level in more than two years, while the jobs market was relatively stable, with unemployment dipping to 4% from 4.1%.

“The gradual cooling of the U.K. labour market continues, with wage growth easing further and vacancies continuing to trend down. There’s little in the figures to change expectations of a steady pace of interest rate cuts from the Bank of England over coming months,” Jack Kennedy, senior economist at Indeed, said in a note.

The BOE cut rates by 25 basis points in August and held them steady in September. Markets are pricing in an 83% probability of a November rate cut as of Tuesday morning.

Ashley Webb, U.K. economist at Capital Economics, said the ONS figures added “further support” to expectations of a rate cut to 4.75% from 5% next month. Thomas Pugh, economist RSM UK, said the door would be “wide open” for a November cut as long as inflation figures — due out Wednesday — fall as expected.

“We expect private sector pay growth to slow gradually over the rest of this year, that would give the [Monetary Policy Committee] ample cover to cut rates again towards the end of the year, probably in November,” Pugh said.

“What happens after December is likely to be influenced by the budget, a more expansionary budget using debt funding to boost investment may mean the MPC opts to cut rates quarterly rather than sequentially.”

The U.K.’s Labour government is due to deliver its first budget at the end of October.

— Jenni Reid