The EU and US futures are rebounding. The difference between the European and US stock exchanges is increasingly evident. As usual, the ECB has made a mistake in its forecasts.
The eurozone economy could go into recession if Russia cuts off gas supplies and the industry adjusts to the energy shortage. This was stated by Luis de Guindos, the vice president of the European Central Bank. He said,
"If so, in our alternative scenario, we see a recession not only in Germany but in the eurozone,"
The ECB previously predicted continued expansion, albeit slightly slower, both this year and next. in its base scenario. Still, the adverse one indicated a recession for the next year. Analyzing the macro picture, we continue to get disappointing data.
Investor sentiment in the eurozone slips in July to its lowest level since May 2020, indicating an 'inevitable' recession in the 19 states. The Sentix index for the eurozone fell to -26.4 from -15.8 in June. A Reuters poll had predicted a reading of -19.9 points for July.
"The energy crisis is leading to considerable economic distortions,' Manfred Huebner, Managing Director of Sentix, said in a statement. "In every area, the dynamics are similar to the 2008 crisis year and what was then the collapse of the financial system is now the risk of a collapse in Europe's energy supply,'"he added.
Hot Stocks and Instruments
Crude Oil WTI: WTI (CL) oil is in free fall with prices that yesterday went below 100 after three months of rises. Natural Gas follows oil, with prices in free-fall near 5.
Unicredit (BIT:CRDI) -2.3%. Intesa Sanpaolo (OTC:ISNPY) -3%. The Financial Times reports that the ECB is considering super-subsidized loans granted recently to requesting banks (TLTRO).
As a result of the regulations of the mechanism and the trend of rates, earnings are generated or could be generated. The ECB seems to want to review the mechanisms to prevent at least part of the extra profits.
The European banks asked for over 2,000 billion, the Italians about a quarter of this figure. Next (BIT:NEXII) The joint venture with the Greek Alpha Bank has been completed, which gives life to Nexi Payments Greece, a new company for the management of digital payments on the Greek market.
Over the next five years, the company will invest over 100 million in Greece, said CEO Paolo Bertoluzzo.
Tesla: (NASDAQ:TSLA) Bad news for the stock, which reported a drop in shipments for the first time in two years.
Conclusion
As expected in the latest articles, the bear phase continues for the markets, especially for the European stock exchanges.
The hypothetical gas crisis in Europe, which will cause a collapse of the GDP, primarily for Germany and Italy, is one step away from occurring.
My medium-term bearish base case for European equities remains intact. The next down leg will be driven by increasing recession risks and downward earnings revisions.
Regarding oil, it is true that a possible recession would cause a collapse in demand, but considering a quarterly time horizon, the situation is interesting.
Many countries have shown that they do not respect their production commitments due to reduced investments in past years that do not allow them to achieve production targets. The hurricane season is looming, which, as forecasts say, will be very violent, causing several blockages of the production plants.
The supply due to Russian oil restrictions continues to be low, and the political situation in Libya is worsening, putting crude oil exports to the Gulf of Sirte at risk.
This could shortly lead to a rally in oil prices to be exploited.
On natural gas, the market always exaggerates, downwards or upwards.
With the crisis in Freeport, one of the largest export plants, which due to an accident, will remain offline until September, a significant domestic oversupply has been created, depressing prices.
But be careful with the expected record heat, and with the hurricane season approaching, the situation could change positively, favoring the rally in gas prices.
Regarding Intesa San Paolo and Unicredit, the news is certainly not positive and could affect banks' profitability.
The Tltro auctions provide a large part of the funds by generating money at no cost to the banks, which then park them in the ECB at a higher interest rate.
Although the two stocks are discounted, with my models indicating a potential Upside of over 50%, this restrictive policy, if implemented, could cause bank prices to fall further.
On Nexi, the news is positive, but according to my models, the title continues to be very expensive, only below 7. I could start thinking about a purchase of the title.
Regarding Tesla, the slowdown in sales is terrible.
As mentioned in previous articles analyzing the balance sheet and prospects, the stock is not at a discount at the moment, with very high multiples.
Only in the $ 350 area could I consider an operation on the stock.