Wednesday, September 28, 2022

Markets worried about Germany: is the European ‘locomotive’ confiscated or is an investment window opening?

Market eyes on Europe’s ‘locomotive’. Germany is at a crossroads and investors do not know whether its ‘engine’ has been seized and has to ‘enter the workshop’ or, rather, has already ‘stopped’ boxes‘ And that opens up investment opportunities for shareholders.

In macroeconomic, climatic and geopolitical terms, the German country is tied hand and foot. Its main stock index so far this year, DAX, the second European selective that behaves worse Among the great parks of the continent. It lost -13.9%, only to be surpassed on the downside by the Italian FTSE MIB, which lost -16%.

The French CAC 40, IBEX 35 and the British FTSE 100 fell -9.2%, -3.60% and -0.06%, respectively. The stock market picture is much better for these countries, where some are already seeing green numbers, especially the United Kingdom.

There are two negative factors that make Germany the great European risk of the moment. The country is preparing for a very harsh winter. Russia threatens to cut gas supplies completely has prompted Berlin and other German cities to take immediate energy-saving measures.

With Russian giant Gazprom reducing the capacity for natural gas flowing through Nord Stream 1, German Chancellor Olaf Scholzo trying to push hard Gas pipeline from North Africa to Portugal and Spain to Northern Europe.

In addition, there is a severe drought in the Rhine river, which is delaying the delivery of goods. That includes supplying energy at a critical moment in which Putin is squeezing his oil and gas might against the old continent. It should be remembered that the Rhine is the most widely used waterway in the European Union.

ace in the hole

In the midst of a perfect storm, Berlin has something up its sleeve. As BlackRock said in mid-July, the euro’s parity with the dollar “will continue to be valid in the coming months”, and that low value of the community currency. “Supports more export-oriented European indices, such as the DAX.”

That is, German companies should sell more abroad because imports are now cheaper than those who buy European products in dollars.

But not only that. Scholz has activated a second lever to revive Europe’s largest economy. On Wednesday he announced plans to cut taxes by 10,000 million euros and thus tackle inflation. This tax relief for households should sustain domestic consumption, with German listed companies also taking advantage of priority.

Caution among analysts

Victor Alvargonzalez, founding partner of Nextep Finance, doesn’t have everything Germany is going to get out of the quagmire quickly and easily. “Refunding the excess money that governments collect as a result of inflation should minimize, not maximize. And this only serves to offset the brutal rise in inflation to some extent”, says this independent financial advisor .

In his opinion, the proposed fiscal stimulus “does not compensate for the terrible damage that a reversal of sanctions forces Germany and, of course, does not offset the risk that Putin will close the gas tap.”

“The only reason we would recommend investing in German funds is if a ceasefire was declared in Ukraine. This will open the door to a reduction in sanctions, as it is not very clear that they operate in Russia, but it is very clear that they do a lot of damage in Europe, especially in Germany”, says the Nextep manager in reference .

For now, caution appears among Spanish investors, in contrast to BlackRock, which was more optimistic about the situation. Julian Pascual, a partner at Buy & Hold, acknowledges that currently in German equities They have only one place in the cities, That they prefer “more for their business rather than their home”.

Its activity focuses on the creation of programming services and digital applications for information technology. In the words of Pascual, “both are the technology services that are growing the most and at the forefront of development, so their potential business path is high”.

Nation World News Desk
Nation World News Desk
Nation World News is the fastest emerging news website covering all the latest news, world’s top stories, science news entertainment sports cricket’s latest discoveries, new technology gadgets, politics news, and more.
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