Europe is starting 2023 with brighter prospects than could not have been expected a few months ago. The unusually warm weather has invalidated concerns that there would be disruptive gas shortages and rationing over the winter. Natural gas prices have been falling steadily since August 2022 from a peak of $9.98 to a low of $2.98 on Wednesday, and LNG supplies from the U.S. and the Middle East kept flowing.
The steadying of the eurozone grows hopes that the block might escape a recession. Fears over the energy market have been alleviated by falling oil and gas prices, also helped by the warmer than usual weather and generous government assistance.
Despite facing a significant energy crisis, the Eurozone’s industrial sector has performed unexpectedly well in the aftermath of the pandemic. Recent data shows an annual growth of 1.9% in industrial production, indicating that post-pandemic recovery has outweighed the negative impact of higher energy prices. However, it’s important to note that industrial production is only slightly above its pre-pandemic level and if the energy crisis persists, it could have a more significant impact on production in 2023.
Looking ahead to 2023, the outlook for the industrial sector is less bleak as the energy crisis moderates. Supply chain issues are expected to improve, and lower input costs will benefit energy-intensive sectors. However, there is still a risk of the energy crisis flaring up again and a decrease in demand for goods. Overall, while the industrial sector has avoided contraction so far, we should not expect too much from it in 2023, and the risk of delayed contraction remains a concern.
The recent monetary developments in the Eurozone indicate that the interest rates hike of 2022 are starting to work as intended. A decrease in private sector borrowing in December indicates that the European Central Bank’s recent shift in monetary policy is starting to have the desired impact.
While this will likely have a negative effect on economic growth in 2023, it is not likely to influence the ECB’s decision on interest rates at their upcoming meeting on the 2nd of February and we anticipate a 50-basis point hike, followed by another 50-basis point in March.
However, as the ECB continues its hawkish stance, it is important to consider the potential consequences on an already struggling Eurozone economy and its ability to adapt to increasingly higher interest rates remains a significant concern.
Meanwhile in Italy, the government plans to review and extend existing relief measures aimed at helping families and firms cope with sky-high energy prices. The government is working on a temporary cap on energy prices under the so-called “two-tier approach” proposed by the European Commission.
The Central Bank of Italy has reported that economic activity in the country has weakened in the last quarter of 2022, with the decline in industrial production and the waning recovery in services contributing to this trend.
Additionally, household spending has slowed down. Harmonized consumer price inflation stood at 12.3% in December on an annual basis, primarily driven by the energy component. The bank also noted that firms participating in their surveys consider that investment conditions remain unfavourable.
Employment grew slightly in October and November, and wage growth remains moderate. The bank’s projections indicate that GDP growth will weaken to 0.6% in 2023 but is expected to strengthen again in the following two years.
Consumer price inflation reached almost 9% in 2022 and is projected to decline to 6.5% in 2023 and reach 2% in 2025. Under an adverse scenario that assumes a permanent suspension of gas supply from Russia to Europe, GDP is expected to fall in 2023 and 2024, with a moderate growth the following year.
Throughout 2022 the global economy was affected by the ongoing war in Ukraine, high inflation, and weakening economic activity in China, which contributed to a slowdown in global demand and sharply lower equity prices.
From its January 2022 high of 28,212 the Italian benchmark index the FTSE MIB has lost more than 8,000 points (circa -28%). Recent signs that inflation is softening, improved supply chains, revised global growth forecasts and the sudden easing of three years of COVID-19 restrictions in China have raised hopes the corporate downturn may not be as severe as feared just a few weeks ago.
The FTSE MIB index rebounded strongly since October 2022, gaining around 29% in the short span of three months. This was primarily due to improvement in economic data, which mitigated concerns regarding an impending recession.
The upcoming earnings season will likely show whether the renewed optimism about the Italian economy that has buoyed equities over the past few months could be justified. On Thursday the index reclaimed the 26,400 level, trading at an 11-month high and approaching its January 2022 high of 28,095. The most bullish scenario at this juncture in time is a re-test of the previous highs, where strong resistance is likely to arise, which could be followed by a decline taking several months to unfold.
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Violeta a rejoint Leverage Shares en septembre 2022. Elle est chargée de mener des analyses techniques et des recherches sur les actions et macroéconomiques, fournissant des informations importantes pour aider à façonner les stratégies d’investissement des clients.
Avant de rejoindre LS, Violeta a travaillé dans plusieurs sociétés d’investissement de premier plan en Australie, telles que Tollhurst et Morgans Financial, où elle a passé les 12 dernières années de sa carrière.
Violeta est une technicienne de marché certifiée de l’Australian Technical Analysts Association et est titulaire d’un diplôme d’études supérieures en finance appliquée et investissement de Kaplan Professional (FINSIA), Australie, où elle a été conférencière pendant plusieurs années.
Julian a étudié l’économie, la psychologie, la sociologie, la politique européenne et la linguistique. Il possède de l’expérience en matière de développement commercial et de marketing grâce à des entreprises qu’il a lui-même créées.
Pour Julian, Leverage Shares est une entreprise innovante dans le domaine de la finance et de la fintech, et il se réjouit toujours de partager les prochaines grandes avancées avec les investisseurs du Royaume-Uni et d’Europe.
Oktay a rejoint Leverage Shares fin 2019. Il est responsable de la croissance de l’activité à travers des relations clés et le développement de l’activité commerciale sur les marchés anglophones.
Il a rejoint LS après UniCredit, où il était responsable des relations avec les entreprises pour les multinationales. Il a également travaillé au sein de sociétés telles qu’IBM Bulgarie et DeGiro / FundShare dans le domaine de la finance d’entreprise et de l’administration de fonds.
Oktay est titulaire d’une licence en finance et comptabilité et d’un certificat d’études supérieures en entrepreneuriat du Babson College. Il est également détenteur de la certification CFA.
Sandeep a une longue expérience des marchés financiers. Il a débuté sa carrière en tant qu’ingénieur financier au sein d’un hedge fund basé à Chicago. Pendant huit ans, il a travaillé dans différents domaines et organisations, de la division Prime Services de Barclays Capital à l’équipe de recherche sur les indices du Nasdaq (plus récemment).
Sandeep est titulaire d’un master spécialisé en finance et d’un master en administration des affaires de I’Institut de technologie de Chicago.