Daily Brief: Europe’s Businesses Have Certainly Been Keeping Their Heads Down This Month

Daily Brief: Europe’s Businesses Have Certainly Been Keeping Their Heads Down This Month

about 2 years ago3 mins

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New survey data out on Monday showed eurozone business activity hit a five-month high in February.

What does this mean?

These surveys ask Europe’s business managers how busy they’ve been each month, and the first one of this year – which came hot on the heels of the post-Omicron panic in January – was a bracing read. But February’s data suggests that any dropoff in activity was just a temporary setback. Business activity in the services industry, after all, rebounded as Europeans went straight back to their favorite theaters, bars, and tourist traps. And activity in the manufacturing industry suggests that supply chain bottlenecks are finally loosening up, which means those companies are finally able to start closing the gap on demand.

EU PMI

Why should I care?

For markets: Will Europe change its tune?

These companies also admitted to what we already knew: that they’re passing costs from steeper wages or higher energy bills onto their customers. In fact, the average price that companies are charging for their products or services jumped by the most since the survey started. Those higher consumer prices could play a part in sending European inflation to another record high this month, which could – some traders are betting – force the European Central Bank to raise interest rates sooner than planned.

EU inflation

Zooming out: Britain is the litmus test.

British companies have been busy too, with a UK survey showing business activity hitting an eight-month high in February. The government is now feeling so confident, in fact, that it’s ready to shrug off every last Covid restriction: mask-wearing, testing, self-isolating – you name it. So all eyes will now be on the country to see whether it really can live alongside the virus, or whether it’ll come to regret its typically stiff upper lip.

Keep reading for our next story...

Saudi Aramco’s Shares Hit An All-Time High

Oil image

Saudi Aramco’s stock hit an all-time high on Monday, as the world’s biggest oil company gets back to its winning ways.

What does this mean?

Aramco broke records when it listed its shares on the stock market in late 2019, only for the pandemic to promptly send demand for oil – and the company’s share price – plummeting. But good things come to those who wait: the oil price has risen more than 80% since the start of last year, and Aramco’s share price has climbed with it. So when the company said on Monday that it’s expecting demand for the slippery stuff to hang around, its stock reached a whole new all-time high. That’s something the Saudi government – which owns the majority of Aramco’s shares – wants to capitalize on: Bloomberg reports that it’s planning to sell some of its shares in hopes of raising even more money than it did from Aramco’s gargantuan initial public offering.

Saudi Aramco stock
Source: Google Finance

Why should I care?

The bigger picture: Here comes $100 oil.

The problem here is that the oil supply can’t keep up with demand. Energy producers were, after all, cutting back on oil projects even before the pandemic, as governments and investors pushed for lower emissions. And when the pandemic arrived, those companies scaled back production even more. That might be why commodities trader Vitol said on Monday it’s expecting oil – which currently costs $92 a barrel – to sit above $100 for a lot of this year.

For you personally: Feel positive about energy.

It might be a good time to be an oil investor: Bernstein Research reckons the seven energy “supermajors” – including BP, Shell, ExxonMobil, and Chevron – will deliver $38 billion to shareholders this year through share buybacks. That’s almost double 2014’s $21 billion – the last time oil traded above $100 a barrel – and could make now a lucrative time to buy in.

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