Europe’s Energy Sector: “The Lehman Moment Just Arrived”
This company’s stock price “broke a support shelf that dates back 14 years”
by Bob Stokes
Updated: October 20, 2022
Back in October 2021, two months before Germany's DAX hit an all-time high, our Global Market Perspective showed a big jump in references to "Lehman" in Bloomberg News.
Of course, the use of "Lehman" in a news article has become synonymous with the collapse of the then financial giant during the depths of the 2007-2009 financial crisis.
Our October 2021 Global Market Perspective said:
The Lehman moment will come later, after investor optimism has receded and stock prices are well off their highs.
That was a year ago, and since then, Europe's key stock indexes have been in a downward trend. In other words, investor optimism across the Continent has indeed receded.
Our October 2022 Global Market Perspective noted:
Right on schedule, the Lehman moment just arrived at one of the Continent's most critical sectors: "Europe's Lehman Warning on Energy Prompts Flurry of Cash Aid" -- Bloomberg, 9/6/22.
The October Global Market Perspective continued with these charts and commentary:
The chart shows stock prices at two of Europe's utility behemoths. Centrica, the largest supplier of gas to domestic customers in the UK, trades at levels last seen in the 1990s, while Fortum Oyj, Finland's largest company by revenue, dropped 68% over the past nine months and broke a support shelf that dates back 14 years.
...The Finnish government stepped in with a €2.4 billion bridge loan to Fortum, while Centrica is seeking billions of pounds of financing amidst soaring demands for collateral.
Then there is this chart of Uniper, the European gas giant sitting at the epicenter of the energy earthquake. On September 20, the German government forked over 8 billion "to nationalize the gas giant and stave off a collapse of the country's energy sector." (Bloomberg, 9/20/22)
Stave off a collapse? The chart shows that Uniper has already collapsed despite every effort.
Some of Europe's energy sector firms face the same kind of liquidity problem which wrecked established investment banks a decade ago. Uniper was reportedly losing €100 million per day in early September, and Fortum's collateral requirement jumped by €1 billion over one single week.
Get more insights into Europe's energy crisis, plus other developing economic and financial crises around the world by following the link below.
Get a Handle on the “Magnitude” of the Bear Market
Consider this quote from Frost & Prechter's Elliott Wave Principle: Key to Market Behavior:
...the Wave Principle often indicates in advance the relative magnitude of the next period of market progress or regress.
Financial market analysis has no guarantees. That said, Elliott Wave International posits that the Elliott wave model is the most useful analytical method available.
Learn what Elliott Wave International's analysts are saying about the potential "magnitude" of the ongoing bear market by following the link below.
Mainly just seven stocks have been holding up the U.S. stock market. As EWI recently noted: "There has never been such a high weighting in the S&P in such a few number of companies." Elliott wave analysis can help you anticipate major shifts in crowd behavior.
Many investors believe that the stock market reacts rationally to news like corporate earnings, oil "shocks," economic data, Fed announcements and so forth. But does the evidence support the notion of such exogenous causality? There are several examples of stock market "myths" and here's just one of them.
The cryptocurrency stage has a clear standout: Solana. On November 16, the world's #6 crypto soared to 18-month highs, outperforming all cryptos in Oct. and Nov. SOL's surge was right in line with its bullish Elliott wave pattern -- NOT a ChatGPT prediction.