STOCKS | Barclays Says Europe Stagflation Risks Are Building

Barclays strategists said rising energy prices and the European Central Bank's possible further monetary tightening are again weighing on European stocks, and they recommended reducing exposure to gas-sensitive sectors. According to Sina Finance, a research team led by Emmanuel Cau said the negative correlation between equities and crude oil has continued to strengthen, which is especially important for Europe. Natural gas prices are rising ahead of winter, adding to inflation concerns. Barclays economists expect the ECB to raise rates again in December, and said more tightening could follow if energy prices remain elevated. The report also said market expectations for a Fed rate hike next week have increased as oil prices rise, though the move could act as a clearing event for markets. Cau wrote that an early-stage rate hike may pressure stocks, but a clearer policy path could eventually receive a positive market response.