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Chart of the Week: Natural Gas Prices Deflate As Equity Markets Rise

Author: Tim Sharp

Researcher: Jack Williams

Published: February 8, 2023

A warmer end to the year in Europe, better than expected Q4 earnings and a weaker dollar have formed the perfect storm, fuelling a strong start of the year for equity markets considering the challenging macro-economic environment in the background.

European bears have had their eye on the Natural Gas price for months now, with a colder than average winter forecasted earlier in 2022, European investors are now breathing a sigh of relief as natural gas prices, catalysed by the ongoing war between Ukraine and Russia, plummet from their highs.

ICE’s natural gas futures ($NGLNQC) marked it’s 2020 low around June at a price of $10,  the following 18 months saw contract prices appreiate to a high of around $780, a move of over 750% for investors early to the trade.

With EU power supply heavily dependant on Natural Gas, this tends to feed into energy prices and in turn inflation, causing concern amongst Investors and Governments alike. With Nat Gas having fell so dramatically from it’s highs and the back end of winter in sight, many investors once with eyes fixed on commodities are now starying to look at main markets once again for oppertunities.

January has been a welcomed start to the year, bringing a 7% advancement in global equities companred with the 4% sell off seen in december. The UK’s Blue Chip 100 Index has advanced nearly 4% at time of writing, alongside breaching it’s all time high of 7877, trading through the 7900 level while the STOXX600 Index has appreciated 6.66% YTD.

In the US, Markets bounced heavily, favouring Tech, Industrials and Banking sectors, the US’s Nasdaq100 index advanced 15.2%, US500 gained 7.27% while the Dow, still in positive territory, lagged behind producing 1.94% worth of gains.

 

(Data/Sources: Charts – RefinitivData, Bloomberg, J.P. Morgan, Barrons Inc. 2023)

 

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