Nordstream II and Europe’s Motionless Market

In it’s ”go green” effort, the European Bank for Reconstruction and Development has decided to halt oil and gas production and exploration investments by 2023 and is accelerating decarbonization with the aim of zeronet emissions by 2050 (1). Yet Europe has been unable to take advantage of the purposed benefits of the now-completed Nordstream 2 project due to tensions in German/American and European/Russian relations. Further sanctions by the US, who’s current administration has swapped the ”zero-sum” stance of its predecessor for an approach that resembles haggling in their discussions over preconditions, would put immense pressure on the European economy and the energy sector in particular (2). Further still, with Germany’s green energy solutions potentially inadequate to meet peak demand with its margin of supply expected to plunge to 3% from a pre-Covid 26%, Germans, who are currently paying the highest power bills in Europe, are sadly unable to benefit from from the energy security Nordstream was meant to bring (3).

Amidst the clamouring rush of Indian IPOs, who’s stock market has seen more than 40 issues already in 2021 with a further 23 awaiting permission in August alone (4), European markets remain largely stagnant; the lack of movement creating stark contrast to that of its western counterparts. One explanation is that unlike the US who continues to funnel exorbitant amounts of cash into its stock market every month, Europe adopted a far more conservative approach, aiming to balance cyclical and structural buffers while ensuring macroprudential monetary and fiscal policies (5).

The EU has has issued what is expected to be the largest supranational bond offering, a heavily oversubscribed 10-year bond, pricing 2bp below the mid-swap rate, making the equivalent yield around .06%. However, some of the biggest-name banks have been prohibited from joining in the bidding, in a statement move to hold them accountable for market-rigging scandals and antitrust breaches over the last decade (6).

 

References

  1. European Bank For Reconstruction And Development Ends All Upstream Oil Financing

  2. Nord Stream 2 war Deutschlands und Europas Chance auf mehr Energiesicherheit – sie blieb ungenutzt

  3. Germany Schnitzels Itself After Ditching Nuclear, Coal Power For Green Pipe Dreams

  4. IPO rush continues in August. 23 companies submit documents to Sebi this month

  5. Macroprudential policy after the COVID-19 pandemic

  6. EU Bars 10 Megabanks From Recovery Bond Sale Over Previous Market Manipulation


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