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Favorable climate conditions and a decrease in the cost of natural gas are fueling a European market rally, a stark contrast to energy crisis fears of last year.
“We anticipated that [natural gas] costs would go up, but it’s been a pretty significant sell-off this year in terms of the cost,” Vance Barse, founder of Your Dedicated Fiduciary, told Bob Pisani on CNBC’s “ETF Edge” on Monday. “Which could arguably be a tail wind for the European consumer to help spend on those luxury goods.”
European luxury stocks are among the breakout stars in 2023, with Rolls Royce up 58% and Hermes and LVMH jumping 34% and 33%, respectively.
“At the middle of last year, [there was] some pretty negative sentiment about what the energy crisis could do for forward-looking growth expectations,” Matt Bartolini, head of SPDR Americas Research for State Street, said Monday. “And the fact that you did have a warmer winter, and perhaps some stockpiling built up in terms of the energy that could be consumed, those fears are obviously going to be lesser now.”
Major European ETFs are seeing strong gains for the year as well. The SPDR Euro Stoxx 50 (FEZ) hit a new 52-week high on Monday is up more than 18% in 2023, and the iShares MSCI Eurozone ETF (EZU) is up 16%.
Bartolini said that the energy crisis concerns that were once weighing down on sentiment have come and gone, reinvigorating optimism into the European market.
“We’re starting to see investors come into that,” he said. “Because there are more things pointing up than there are more things pointing down for the European markets.”
