2023-10-03 12:59:03
FRANKFURT (dpa-AFX) – European energy suppliers continued to be under pressure on Tuesday, in the wake of weak US data. On both sides of the Atlantic, the rise in bond yields is weighing on prices. Falling prices, even higher interest rate expectations and little interest on the part of investors in “safe haven” in the face of recession risks – in the eyes of many market participants, several elements are at play currently unfavorable for the sector, explains analyst Sam Arie of the major Swiss bank UBS.
The European sector index lost 2.4 percent within the Stoxx Europe 600 and reached its lowest level since the end of October 2022. In the weakened Dax, suppliers RWE and Eon as well as the energy technology group Siemens Energy were among the biggest losers with price declines of 2.8 to 3.3 percent. The latter has also been suffering for months from the constant increase in costs linked to technical problems with the wind turbines of its subsidiary Siemens Gamesa.
Generally speaking, stocks in the renewable energy sector continued to experience selling pressure on Tuesday. UBS expert Arie spoke of a feeling of fragility, particularly due to the fall in the Orsted price following problems with wind turbines in coastal waters. The debates in many countries regarding scaling back environmentally friendly policy measures don’t help either, he says.
At the end of the MDax, shares of wind turbine manufacturer Nordex and wind and solar farm operator Encavis fell 4.5 and 4.1 percent, respectively. Solar group SMA Solar performed slightly better, with a decline of 1.4%. In the SDax, shares of Encavis’ competitor Energiekontor lost 3.8%. Fuel cell supplier SFC Energy, with minus 2.7 percent, was also among the losers.
Aside from Eon, stocks have also lost value since the start of the year, sometimes even drastically. On the other hand, despite their recent weakness, the main European stock indices can still post profits for 2023. JPMorgan market strategists believe that following the correction, there is a good chance of strengthening the positions they recommend all the time. way in the energy sector. Mislav Matejka and his team explain that US bond yields may be regarding to peak, the regulatory environment for utilities will improve and uncertainty will disappear. Valuations have become significantly more attractive, according to experts. And in the medium term, the theme of renewable energies remains an important driver.
UBS expert Arie also sees reasons for hope. At some point, bond yields should stop rising or even fall, causing commodity prices to move in the opposite direction. The economic headwinds might then turn into tailwinds in 2024/25. UBS market strategists continued to forecast recession risks and a reduction in key interest rates for the coming year. Furthermore, following discussions at an internal industry conference, he sees little evidence that the positive fundamental conditions for renewable energy are no longer in place./gl/ag/men
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