Recent data confirming a second consecutive quarter of negative US GDP growth has refocused investors' minds on recession risks. The current strength of the labour market challenges the notion that the US is currently in recession, but it is still clear that the economy is losing momentum. In Europe, second quarter growth data was relatively resilient, yet headwinds from elevated gas prices will likely strengthen as winter approaches. Russian gas flows to the EU through the Nord Stream 1 pipeline currently stand at just 20% of average levels, and prices have surged accordingly. The European Commission is now looking to coordinate gas savings across the region. Fiscal policy will likely provide some offset, but the weakening growth outlook may challenge the ability of the European Central Bank to deliver significant further tightening later this year.

European gas prices spike again on fears of supply disruption

Natural gas prices, EUR per MWh