Europe's Recession Is Here
Dear readers,
Welcome back to the Patellic Newsletter, where we provide technical and sentimental analysis about financial markets. On top of that, we deliver crucial market information that can influence financial markets to be always a step ahead of major market movements.
We are almost at the point of a global recession because most countries are getting crushed by their central banks. The economical damage created by those central banks will only get worse throughout 2022 and 2023 until spiralling high inflation has eventually been defeated, by putting the global economy in a recession by hiking interest rates.
Europe’s Sanction Problem
Europe’s tensions with Russia over Ukraine is rising to its peak with Europe threatening a price cap on Russian Gas. Putin responded by saying in Vladivostok that at the limit Russia will export nothing: No gas, no oil and no food to Europe.
While Europe’s gas reserves are almost full, a complete export halt from Russia will have a relative big impact on Europe’s economy.
Russia is a commodity superpower, it exports per year millions of tons of food, oil and more to other countries. And maybe you guest it, Europe is the biggest customer of Russia, with the second biggest buyer being China. While China has no problems with Russia (is neutral on the Ukraine crisis) it continues to buy commodities from them. Europe is experiencing contractions in its economy because of the sanctions it has put against Russia from invading Ukraine.
We believe that the sanctions was a really bad idea from Europe (and the United States) because energy commodities skyrocketed through scarcity which directly benefited Russia.
Gazprom, the biggest company energy exporter of Russia announced a record 2.5 trillion ruble ($41.75 billion) net profit in the first 6 months of 2022. So while Europe is getting weaker in economic terms, Russia is holding relatively steady.
Of course the dozens of sanction packages on Russia has created a big impact on its economy, but not in a way Europe has hoped to stop the invasion in Ukraine.
Technical Analysis
Germany, the biggest economy of Europe is almost at its last support before we expect that a major sell off will take place. This is because of the energy and inflation problem in Europe. If Germany gets a cold winter we expect that their gas reserves will drain fast, this will in time spark more uncertainty across Europe.
So if the DAX (Germany’s index) falls below our drawn support we are tempted to short the index, because we expect a 20% decline in the coming months when economic conditions are worsening.
With the ECB (Europe’s Central Bank) hiking interest rates with record breaking pace (0.75% hike this week), investors will think twice before buying equities.
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