Inflation grows, gas prices drop down

Germany’s and the UK’s inflation has reached a 10% percent, however the general EU value is still below that level. Of course these values are still very high, especially considering the expected level should have been around 2-3%. Consequently, the EU government ends up in a tough situation. High inflation level makes the ECB to adjust their monetary policy, while the finance ministry cuts the expenses. This however is hard to achieve due to a really complicated economical background.

With that we see an elevated uncertainty and as a result the stock market turbulence. Have a look at the gap between the week’s leaders and outsiders. E.g., the best security from the DAX index has gained 4.1% while the outsider tested a 3.74% loss. The EURO STOXX 50 has yet a bigger gap, the leader grew by 2.67% while the PROSUS NV securities lost 6.61%.

Last week leaders and outsiders:

DAX:

Top: Siemens Healthineers AG +4.1%, Sartorius AG Vz +3.71%, Vonovia SE +3.05%

Flop: Deutsche Börse AG -3.74%, Daimler Truck Holding AG -2.36%, Siemens Energy AG -2.017%

EURO STOXX 50:

Top: ASML Holding N.V. +2.67%, ENI S.p.A. +2.35%, Vonovia SE +1.93%

Flop: PROSUS NV EO -,05 -6.61%, Deutsche Börse AG -5.13%, adidas AG -4.89%

Dow Jones (us 30):

Top: salesforce.com Inc. +3.14%, IBM Corp. +2.87, Intel Corp. +1.76%

Flop: Procter & Gamble Corp. -2.58%, DOW Inc. -1.88%, Coca Cola Co. -1.78%

Pay your attention that the indices grow due to relative stability or even a moderate increase in the 10-year yields profitability. This indicates that the EU index strengthening is unstable.

Bonds market:

Returning to the bonds market, let’s have a look at a moderate growth of the 10-year yields in most of the EU countries. With that the Germany securities have more moderate profitability values especially in comparison with those of the US. With elevated inflation on the background, political and geopolitical instability in the EU, this difference provokes a capital loss. As a result, there’s a risk the buyer activity would grow on the EU bonds market.

Oil market

The oil market is not an exception in terms of volatility. After a moderately optimistic mood related to the US reserve reduction and China’s COVID restrictions being taken off, the buyers’ activity also reduced. This partially was provoked by Biden’s report about releasing the oil from strategical reserves. It is also important to consider the overall bearish direction due to the world’s economy slow down and, consequently the physical oil demand reduction.

The WTI quotes did not manage to hold above $87, which is a bad sign for buyers. In the meantime the Brent buyers could not even manage to reach the $95/barrel level. All of that increases the probability of a descending direction in the middle term.

The oil and gas price reduction will provoke a sales wave in the energy sector.