The Cambridge Weekly –20th November 2023

The Cambridge Weekly –20th November 2023

Inflation genie back in the bottle?

Last week was another good one for most investors. In sterling terms, the strongest equity markets were in Europe with the DAX up 4.5% since last Friday afternoon. The biggest winners have been small and mid-sized firms; the UK Mid-Cap index has stormed up by 4.3% compared to a 1.4% increase for the UK Large- Cap index. Likewise, the Russell 2000 (America’s most-watched market index for small and mid-sized companies) is up 5.1% in US dollar terms.

Global economic round-up

One year ago, high levels of inflation were the greatest concern for investors and policymakers. For much of this year, the pace of price rises has declined but in order to achieve this, central banks have raised interest rates to cool down demand and so the world’s economy has slowed. That slowing has done its job, with an increasing impact on inflation.

Europe’s natural gas has a bumpy road down

A year ago, Europeans were terrified they would run out of natural gas during a cold and bleak winter. Now, the continent has more gas than it can handle. European gas supplies, which had been building from an already high level (by seasonal standards) since the spring, officially reached 100% of storage recently. The 100% level refers to the secured capacity of working gas volume as reported by individual facilities which, in many cases, can be lower than the total physical capacity. That means reported storage can sometimes exceed 100%, as was the case in Portugal (107.3%), Romania (103%), Spain (100.4%) and Germany (100.03%) as of the start of last week.