By
Godfrey Benjamin
August 16th, 2023
In the Euro area, the inflation figures for the month of July were pegged at 8.9 percent in July 2022, up from 8.6 percent in June 2022 and 8.1 percent in May 2022.
The Euro is reflecting a more bearish sentiment in the global stock and energy ecosystem as it has slipped to a 20-year low of 0.9903 against the United States Dollars. This fall mimics the fall in top European stock indices including the FTSE 100 Index (INDEXFTSE: UKX) which is down 0.74% to 7,478.00.
The German DAX PERFORMANCE-INDEX (INDEXDB: DAX) is down 0.12% to 13,214.57. This encompassing decline is also modeled by the Asian Pacific market as well as the United States financial landscape. The Nikkei 225 (INDEXNIKKEI: NI225) is down 1.19% to 28,452.75, while the Shanghai Component, SSE Composite Index (SHA: 000001) shed off a negligible 0.048% to close Asian trading at 3,276.22.
The benchmark European oil price slumped by as much as 13% overnight as a Kazakhstani gas pipeline got damaged overnight. The damaged pipeline passed through Russia to supply oil and gas to Europe, and this disruption is coming at a time when Russia has planned to proceed with scheduled maintenance on its main Nord Stream 1 pipeline. This maintenance is bound to stop the supply of gas to the European area for 3 days at the end of this month.
Energy costs have become the main defining fuel for rising inflation, especially in the European Union. With the region so dependent on Russia for the majority of its gas supplies, the ongoing war in Ukraine has shifted the paradigm with EU leaders torn between extending sanctions to cutting off gas reliance from Russia.
The energy situation has dampened the economic outlook in the entire EEA area, and this bearish position is being confirmed by market analysts and the Euro 20-year low slide.
“Increasing risks to the supply of natural gas from Russia to Europe are darkening the economic outlook,” said Emirates NBD economists Edward Bell and Daniel Richards.
Global Inflationary Growth and Response
In the Euro area, the inflation figures for the month of July were pegged at 8.9 percent in July 2022, up from 8.6 percent in June 2022 and 8.1 percent in May 2022. The gradual increment is concerning, and like other established economies like the United States, the inflationary growth has forced the European Central Bank (ECB) to raise interest rates, a move which if not properly curtailed can stir economic recession.
“Europe’s recession is a foregone conclusion, especially as the risks of disruptions for energy supplies remain elevated,” said Edward Moya, senior market analyst for the Americas at Oanda.
The economic sentiment within the EU is also a stark reality for Americans. Inflation has continued to remain high, and despite the efforts to keep the inflation figure stagnant in July, the market is still largely agitated about the Fed’s potential response to the yet-to-be-capped inflation.
In the US, the projection is to get inflation down to 2% on an annualized basis, attempts to achieve this might upset the market in a mild way, hence, industry experts across the globe are gearing up for the strategies to deploy to stay resilient.