Market: the struggle for energy

Market: the struggle for energy

A look at the next day in European and global markets from Anshuman Daga

Global stock markets are stabilizing from the carnage earlier this week of hot US inflation data, but European investors need to climb a wall of worry about any meaningful recovery in the near term.

Europe’s policymakers are in trouble as they face the delicate task of balancing unprecedented interest rate increases with the risks of a sharp slowdown in their economies, which are grappling with high energy costs.

As the 27-nation European Union grapples with an energy crisis that shows no signs of abating, the bloc’s executive has proposed snap taxes on energy companies to protect consumers from rising energy prices.

However, European Central Bank policy maker Francois Villeroy de Gallo said interest rates could reach a level where they are neither stimulating nor slowing the economy by the end of the year.

Last week, the European Central Bank raised interest rates by 75 basis points, just weeks after a 50 basis point move, and promised several more steps over the coming months as eurozone inflation remains at its highest rate in nearly half a century.

The European Central Bank has just begun the cycle of interest rate increases unlike the Federal Reserve which started earlier this year.

Barclays (LON πŸ™‚ Global Head of Research, Ajay Rajadhyaksha, forecasts a recession in Europe in the first half of 2023, with the economy shrinking more than 1% over the calendar year.

But, he said, “there is a line between gloom and doom, and that’s where we think the global economy sits.”

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Wednesday brought some good news for UK markets after UK inflation fell for the first time in nearly a year in August, with lower fuel prices providing some relief to households and the Bank of England.

Meanwhile, data showed that Japan posted a record trade deficit in August as energy imports soared.

And while Queen Elizabeth’s funeral will be celebrated on Monday across Britain, thousands of people will suffer supermarket closures and doctor’s appointments canceled due to a sudden national holiday.

UK highest inflation rate in G7 https://fingfx.thomsonreuters.com/gfx/polling/byvrjgbkeve/Pasted%20image%201663137676244.png

Key developments that may affect the markets on Thursday:

Economic data: Eurozone trade and wages data in the second quarter, French CPI, Germany wholesale price

US Import/Export Prices for August, Philly Fed Sep Business Index, August Retail Sales

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