Volkswacht Bodensee - Stocks mostly fall on European gas woes, inflation worries

Paris, Frankfurt and London all closed in the red, failing to hang on to earlier gains. Wall Street stocks began strongly, but later came under pressure as investors bet on more aggressive Federal Reserve moves to counter inflation.

"There's little doubt instability is here to stay, and nerves are frayed as central bankers pull out all the stops to battle with inflation," Danni Hewson, analyst at AJ Bell said.

"And there's plenty of tension too over Russian moves to try to annex parts of Ukraine as well as worries about gas supplies after it emerged the pipeline that carries gas from Russia to Europe has suffered some kind of damage."

European natural gas prices surged nearly 10 percent at one point, to 190.50 euros, following news that the two Nord Stream gas pipelines linking Russia and Europe have been hit by unexplained leaks.

EU chief Ursula Von der Leyen said the leaks were due to "sabotage," threatening the "strongest possible response" to any deliberate disruption of European energy infrastructure.

The pipelines have been at the center of geopolitical tensions in recent months as Russia cut gas supplies to Europe in suspected retaliation against Western sanctions following its invasion of Ukraine.

"This damage is the clearest signal so far that Europe will have to survive the winter without significant Russian gas flows," analysts at Charles Schwab said in a note to clients.

- Strong dollar -

Recession prospects have risen in recent weeks as central banks keep hiking interest rates to try and cool decades-high inflation, boosting in particular the dollar.

Expectations for more Federal Reserve interest rate hikes dampened enthusiasm on Wall Street, where stocks opened solidly higher following several losing sessions in a dynamic initially attributed to an "oversold" market.

But markets later reversed course following better-than-expected data, including a jump in consumer confidence in September.

While the Nasdaq finished higher, both the Dow and S&P 500 declined.

The good economic data "further emboldens the Fed," said Art Hogan, analyst of B. Riley Wealth Management, noting that the pullback in stocks followed a jump in the yield on the 10-year US Treasury note.

The aggressiveness of the Fed has also boosted the dollar against other currencies, although the greenback retreated Tuesday against the pound after hitting an all-time high on Monday.

The small recovery in the pound came after the Bank of England said it would "not hesitate to change interest rates by as much as needed."

During a visit to North Carolina, US Treasury Secretary Janet Yellen told reporters that the Fed is "moving faster than many other countries" in explaining the dollar's surge.

"These kinds of developments, which represent a tightening of financial conditions are part of what's involved in addressing inflation but I'm not seeing at this stage -- and we are monitoring carefully -- disorderly financial market developments," Yellen said.

- Key figures at around 2050 GMT -

New York - Dow: DOWN 0.4 percent at 29,134.99 (close)

New York - S&P 500 DOWN 0.2 percent at 3,647.29 (close)

New York - Nasdaq: UP 0.3 percent at 10,829.50 (close)

London - FTSE 100: DOWN 0.5 percent at 6,984.59 (close)

Frankfurt - DAX: DOWN 0.7 percent at 12,139.68 (close)

Paris - CAC 40: DOWN 0.3 percent at 5,753.82 (close)

EURO STOXX 50: DOWN 0.4 percent at 3,328.65 (close)

Tokyo - Nikkei 225: UP 0.5 percent at 26,571.87 (close)

Hong Kong - Hang Seng Index: FLAT at 17,860.31 (close)

Shanghai - Composite: UP 1.4 percent at 3,093.86 (close)

Pound/dollar: UP at $1.0730 from $1.0689 on Monday

Euro/dollar: DOWN at $0.9595 from $0.9609

Euro/pound: DOWN at 89.39 pence from 89.90 pence

Dollar/yen: UP at 144.81 yen from 144.75 yen

Brent North Sea crude: UP 2.6 percent at $86.27 per barrel

West Texas Intermediate: UP 2.3 percent at $78.50 per barrel

J.Horn--BTB