Electricity Watch: Why Ze Germans are OK for now
We have so far seen a very contained market reaction to the electricity aid package from Germany last week, but there are loads of reasons why markets can absorb the demand-fuelling news in energy markets short-term. Maybe there is a window of opportunity for the German industry before price pressures return?
As per usual we deliver the conclusions upfront before getting to the details:
1) The IFO index covering the Germany industry is likely going to improve in the coming months
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6) There is a window of opportunity for the EUR and German stocks short-term. We remain long Germany in our portfolio but await better fundamentals in the Nat Gas trade for now.
Chart 1: The ZEW details point to 5-10 index points higher IFO in the coming months
The weather is playing ball with the German electricity aid package as hydro storages are elevated while Nat Gas storages are almost full. Even if the German heavy industry starts
demanding 15-20% more electricity, the troubles are a few months away.
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