Is the European “locomotive” confiscated or is an investment window opening?


The eyes of the market The “locomotive” of Europe. Germany is at a crossroads and investors do not know whether its “engine” has been seized and must “enter the workshop” or, rather, has already “stopped” boxesAnd that opens up investment opportunities for shareholders.

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

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

Two negative factors make Germany the biggest European risk at the moment. The country is preparing for a very harsh winter. Russia threatens to completely cut gas supply prompted Berlin and other German cities to take immediate energy-saving measures.

As Russian giant Gazprom cuts natural gas capacity through Nord Stream 1, German Chancellor Olaf Scholzo try to push hard Gas pipeline from North Africa to Portugal and from Spain to Northern Europe.

[La sequía del Rin en Alemania dispara el precio del gas en España un 17% en un solo día]

In addition, there is a severe drought in the Rhine, which delays the delivery of goods. This includes providing energy at a critical time when Putin is wielding his oil and gas power against the old continent. Remember that the Rhine is the most 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 parity of the euro with the dollar “will continue to be valid in the months to come”, and this low value of the community currency. “Supports more export-oriented European indices, such as the DAX.”

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

But not only. Scholz has activated a second lever to revive Europe’s leading economy. On Wednesday, he announced his intention to cut taxes by 10,000 million euros and thus fight inflation. This tax relief for households should support domestic consumption, with German listed companies also benefiting from priority.

Caution from analysts

Victor Alvargonzalez, founding partner of Nextep Finance, doesn’t have all that Germany is going to get out of the quagmire quickly and easily. “Reimbursement of excess money that governments collect due to inflation should minimize, not maximize. And that only serves to partially offset the sharp rise in inflation,” said the independent financial adviser.

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

“The only reason we recommend investing in German funds is if a ceasefire has been declared in Ukraine. This will open the door for sanctions relief, because it is not very clear that they are operating in Russia, but it is very clear that they are doing a lot of damage in Europe, especially in Germany”, says the head of Nextep in reference.

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

Its activity is centered on the creation of programming services and digital applications for information technologies. In Pascual’s words, “Both are the fastest growing and cutting-edge technology services, so their market potential is high.”

Russo-Ukrainian War


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