Macro Minutes: What’s Behind European Equities' Rally?

Key Points

• Last year, many presumed that, given Europe’s pre-war reliance on Russian natural gas, sanctions would cause high wintertime gas demand to outstrip supply—ultimately resulting in an energy shortage-driven recession in Europe.
• Contributing factors to European equities’ rally this year likely include Europe’s focus on replacing Russian energy supply, lower consumption levels than anticipated, and accelerated liquid natural gas projects.
• Though expectations for a European recession have weakened some as European energy supplies are more available than expected, sentiment in the region is still quite sour—especially in Germany.