over 1 year ago • 1 min
Europe may have shifted from an agrarian economy a century ago, but its fortunes lately have been increasingly tied to the weather. See, ever since Russia turned off its natural gas supplies to the European Union, the bloc has been suffering from high gas and electricity prices. Those steeper prices have been weighing on the competitiveness of its industries and have had investors worried about the risks of blackouts and recession. Markets have reflected those fears: in US dollar terms, Europe’s STOXX 600 is down 31% this year, while the S&P 500 is down 21%.
But lately, things have been looking rosier for Europe, not least because it’s been a warmer-than-usual October and it’s forecast to get warmer still. The chart above shows a good start to October, with this year’s temperatures (blue line) mostly trending above the five-year average (pink line). The balmier weather sent European natural gas prices below €100 ($99) per megawatt-hour for the first time since June. Warmer weather is great for Europe as it postpones the need for heating, reducing gas demand and pushing down energy prices. Each warm day increases the opportunity for the region to build supplies, delays a drawdown of gas storage, and reduces the risks of blackouts and rationing.
The priority for Europe has been to get through this winter – and to secure more liquified natural gas (LNG) cargoes for future winters. With the recent run of milder temperatures, that initial goal appears increasingly within reach, And Europe is looking more and more like an attractive place to invest…
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.