Inflation has been the main topic of 2022, with the geo-political conflicts and post-pandemic events driving the stock market to a problematic low. Last year saw many stocks hit new lows, with countries experiencing extreme inflation.

However, European assets have shown some resilience in the new year by pushing for highs three days in a row in the new year. These developments come from investor optimism and signs of easing inflation as the energy crisis lessens its effect on the economy.

European Stock Market

The Stoxx 600 index, which represents the performance of 600 major European companies listed on stock exchanges, has risen 1% on Wednesday and is up 3.3% since Sunday. The DAX and CAC, which represent the performance of companies listed on the stock exchanges in Germany and France, respectively, have also seen significant gains on Wednesday.

The Financial Times Stock Exchange Index, which represents the performance of companies listed on the stock exchange in London, has also gained more than 0.3%. These increases in stock market indices may indicate positive performance for the companies.

According to The National Institute of Statistics in France, inflation has dropped 6% since December 2022 and 6.5% since November 2022. However, the consumer price inflation rate means that, on average, the prices of goods and services bought by consumers increased in December.

A drop in the inflation rate can be good because the prices of goods and services are decreasing as rapidly. In addition, this dip can relieve consumers who may have had a rough time with the rising cost of living.

It is also a positive development for investors because it suggests that the economy is not overheating and that the central bank will not need to increase interest rates aggressively to keep inflation in check.

The US Stocks

The stock market in the United States had a slower start to the new year than Europe’s stock market. Despite a morning rally, the S&P 500 and Dow dropped while US futures were slightly up. The poor performance of tech stocks, as represented by the Nasdaq Composite being down 34% from last year, may be contributing to the slower start on Wall Street.

Energy Crisis on the Drop

This winter, Europe will likely have a sufficient supply of natural gas due to high storage levels and mild weather. This development has caused the price of natural gas futures to drop significantly.

European countries had been stockpiling natural gas in anticipation of a decrease in exports from Russia, their largest supplier. Despite earlier concerns, the risk of an energy shortage in Europe has diminished. However, Europe will need to refill its natural gas storage before the next heating season.