US equity futures fell Wednesday amid rising concern that Europe will lose access to Russian gas, sending the region into a recession that could have global repercussions.

Contracts on the Nasdaq 100 and the S&P 500 turned lower, reversing early gains on news the European Union is preparing for a scenario where Russia halts gas exports to retaliate against sanctions over its invasion of Ukraine. 

“Markets are starting to come to a realization that the tail risk of a sustained meaningful drop in European gas imports is rapidly becoming the core risk,” said Seema Shah, chief global strategist at Principal Global Investors. “Global markets have largely assumed they will be immune to European pain. However, Europe is a key trade partner for several major economies and spillover effects are almost unavoidable.”

The fragile sentiment sparked a reversal in haven assets, as Treasuries rose and a gauge of the dollar posted its first gains in four days. The yield on the 10-year benchmark fell back below 3%. 

The risk of a global downturn and Europe’s energy crisis doused optimism about the US earnings season and confidence the Federal Reserve will take a more measured approach to tightening. 

The EU proposed that the bloc cut its natural gas consumption by 15% over the next eight months to ensure that any full Russian cutoff of natural gas supplies won’t disrupt industries over the winter.

Read more: EU Proposes 15% Cut in Gas Consumption on Russian Supply Concern

West Texas Intermediate crude oil slipped below $103 a barrel. Bitcoin hovered above $23,000 after climbing out of a one-month-old trading range.

In the premarket, Netflix rose after it reported better-than-feared earnings late on Tuesday and said it expects to return to subscriber growth before the end of the year. 

A tentative market recovery in June follows the worst combined first-half losses on stocks and bonds on record as markets were crushed under the weight of jumbo rate hikes and unrelenting price pressures.

How far will the Fed go in this hiking cycle? It takes one minute to participate in the confidential MLIV Pulse survey, so please click here to get involved. 

Key events to watch this week:

• Earnings this week include Tesla
• Bank of Japan, European Central Bank rate decisions. Thursday
• Nord Stream 1 pipeline scheduled to reopen following maintenance. Thursday

Some of the main moves in markets:

Stocks

• Futures on the S&P 500 fell 0.2% as of 8:44 a.m. New York time
• Futures on the Nasdaq 100 fell 0.2%
• Futures on the Dow Jones Industrial Average fell 0.3%
• The Stoxx Europe 600 fell 0.5%
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro fell 0.3% to $1.0194
• The British pound fell 0.2% to $1.1970
• The Japanese yen was little changed at 138.11 per dollar

Bonds

• The yield on 10-year Treasuries declined seven basis points to 2.95%
• Germany’s 10-year yield declined eight basis points to 1.20%
• Britain’s 10-year yield declined 11 basis points to 2.07%

Commodities

• West Texas Intermediate crude fell 1.9% to $102.25 a barrel
• Gold futures fell 0.1% to $1,726 an ounce.

SOURCE :- bloomberg