At the opening of today’s stock exchange session, the oil stocks in Piazza Avari were affected by the strong sales. In particular, Eni lost -1.86%, while Tenaris lost -2.85%. On the other hand, Saras and Saipem, after an initial decline, posted mid-session increases of +1.79% and +0.39%, respectively.
The sub-fund’s decline can be explained by the recent optimism in the markets which reacted positively to slowing inflation in the US, and in conservative words feed itJerome Powell, who has clearly indicated his willingness to slow down the intensity of rate hikes at the committee’s next meeting Federal Open Market Committeescheduled for December 13-14.
Thus, the effects were not long in coming even on European stock exchanges where inflation showed only shy signs of slowing down (in Eurozone flash estimations it grew less than expected at +10% y/y).
So investors believe they have reached a turning point with immediate effects on stocks. In fact, until now, the inflationary macroeconomic scenario has been punishing consumer goods, industrial sectors, and (technological) growth in favor of companies operating in the energy and banking sectors, which are fueled, respectively, by record commodity prices and high interest rates by the central bank. banks.
Now, however, we seem to have reached a fundamental paradigm shift. In fact, operators’ expectations are pushing, also in Europe, to cut interest rates by European Central Bank In the wake of the continued deterioration of macroeconomic fundamentals (as confirmed by recent indicators PMI).
Despite the hopes, the scenarios are very different from those of the United States. Indeed, in the Old Continent, rates have not yet reached a high enough level to curb price growth (also because rates were raised for the first time only in July) while inflation seems to have started a downward trend, which, however, is not yet confirmed.
Having said that, the markets, which are already pricing in future expectations, now believe that inflation and rates will come down, and thus investors have begun to rebalance their portfolios by buying stocks in sectors such as consumer goods, industrials, and luxury.
On the contrary, energy stocks sold off sharply, despite spending a large part of 2022, also on aggregate demand concerns in China which is still struggling with rising COVID-19 cases hampering travel due to the restrictions policy imposed by the authorities.
However, the recent protests in the country may partially prompt the Beijing government to ease restrictions, fueling demand for crude oil once again.
At the macroeconomic level, the scenario appears to be heading towards a fundamental change consisting of lower interest rates and lower levels of inflation. However, in the near term, oil prices will mainly be driven by aggregate Chinese demand.
Despite this, economic growth in Europe is expected to moderate in the coming months with a cascading effect also on the demand for crude oil and gas for production purposes. As a result, crude oil prices could fluctuate between $75-$80 per barrel in the coming months, offset by Cabinet decisions.OPEC Which will almost certainly cut production quotas to support prices.
Finally, this does not mean that oil stocks should not be kept in a portfolio. In fact, the big dividend and record quarterly results anyway could drive prices up aggressively in the coming weeks as well.
However, there may be corrections in the wake of increased investment options in the market and portfolio rebalancing by institutional investors.