J.P. Morgan: Falling gas prices are supporting European equities

January 23, 2023

After the cessation of Russian gas supply, concerns mounted that Europe's energy crisis might spill over into next winter and longer-term gas futures moved significantly higher.

However, a warmer than expected start to this winter and robust flows from alternative sources of supply have left European gas storage levels significantly higher than average for this time of year, increasing investor confidence that Europe will not run out of gas. Prices for the delivery of gas next winter have therefore cheapened markedly, fuelling a sharp rally in European equities. The European stock market could remain well supported this year as the risk of a deep recession recedes.