Chart of the Week
Equity markets have recovered sharply since the start of October. Having hit a low point on 29 September, the Eurostoxx Total Return index had climbed 18% by 24 November to reach levels last seen in late February.
A number of factors have contributed to the recent upswing in European equities. First, the third-quarter earnings season proved positive and helped boost investor sentiment about how well companies are handling inflation. Second, European TTF gas prices slumped due to mild temperatures and ample inventory levels in the run-up to the winter season. In parallel, oil prices have remained below $100 a barrel and agricultural commodity prices softened when the Ukrainian grain export deal was extended. Lastly, recent weeks have seen the euro gaining ground against the US dollar, easing some of the pressure on the ECB to maintain the pace of rate rises.
While the upswing has provided equity markets with welcome relief amid ongoing geopolitical tensions, it may be short-lived. With commodity prices still high, the threat of an energy crisis hangs over Europe and carries with it multiple risks for eurozone growth.
The opinion expressed above is dated November 25th, 2022 and is subject to change.
See also: https://latribune.lazardfreresgestion.fr/en/eurozone-inflation-has-become-broad-based/
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