7.09 - Germany export numbers are underwhelming
Euro’s behavior is clear now.
Germany is the strongest economy in Europe. Together with France it is forming a kind of a backbone for other EU countries to fall onto. And it simply cannot afford to fall apart and display some kinds of weaknesses and troubles because where there is weak Germany, there is no EU at all. And EU falling apart will be the last straw that could plunge not only the EU but the whole world into a horrific financial crisis. So when we hear about problems, happening in German economy we naturally worry about the state of EU future.
American tariffs seem to hit everything they come in contact with. And for them it is natural as that is exactly what they are there for – making damage for economies ‘rival to the United States’. Although there are hardly any rivals to the strongest economies in the world, Trump refuses to believe in that. And that is exactly how he justifies making so much troubles for even one of the strongest economies in the world – Germany.
Due to American tariffs German export and industrial output levels have fallen this summer which was pretty unexpected for us to see. The largest economy in Europe starts to feel the smother, coming from America. Given that no one could predict that happening it is no wonder for us now that euro was behaving the way it was behaving the whole summer. right now we feel the turbulence from all of the trade tensions, even though a kind of trade agreement was reached by German and American officials. Could you imagine what numbers would display if there was no agreement?
Although the number are not that low, we still worry. At this point there is no way to predict what euro’s reaction is going to be when Brexit finally kicks in and Great Britain is no longer a part of the EU. Although pound and euro are not really correlated right now and their movements are more dependent on the greenback they will have to establish new relations. And we sure hope that their relationship is going to be much stronger than their bond with dollar. Why? Well, it seems that EU will have easier time to make deals with Great Britain and vice versa than with the Unites States, at least until Trump’s term is over.
But back to Germany. Of course, there is no way that Germans are going to let the situation recover by itself. The way to boost the numbers is already being searched for and the decision is to be presented in the nearest future. And we surely hope so, because there is nothing in the world that we need less than unstable euro. And with German economy weakened it is possible that euro go out of control.
Since 2008 when Russian gas was needed and gladly accepted all around the world a lot of things have changed. First of all, a lot of Russian goods came under international sanctions that led for a lot of international companies to be unable to work together with Russia and its companies. Second, with Russia trying to take control over the countries that it sold gas to with the asset a lot of countries started to look for alternative sources of the fuel. So, one led to another and now we see that Russian gas giant Gazprom is no longer as stable and unreachable as it used to be.
Novatek is a small and relatively unknown company that is not really popular in the world. But even it managed to surpass Gazprom in Thursday market in Moscow. And yes, the situation may be changed now, but this rally may be an indicator that Gazprom is in more trouble than we thought. And with it being the third largest market cap in Russia we could go out on a limb and say that ruble is also in much bigger trouble right now that we thought it was a week ago.
You see, Russian economy relies on its gas and oil resources way too much. It is safe to say that there is no safety net for it safe for one of these assets. The whole system was built around oil and gas resources of the country. And now, when it came under sanctions and there are not as much partners left. And Gazprom is the best indicator of that fact.
In 2998 Gazprom’s value was $340 billion more than Novatek’s. today both of the market caps are looming around $50 billion with Novatek even costing more than the biggest natural gas supplier in the country. Isn’t that an indicator of trouble? What can yank the company out of the pit? Only sanctions being lifted. Without it shares of Russian companies are going to become cheaper and cheaper until the point of selloff when traders’ patience runs out.
So maybe if you are a Gazprom trader it is time for you to turn around to Novatek? This one doesn’t have spoiled reputation after all.
- by Anna K.