Finanshuse: Endnu et “Annus Horribilis” for Europa – den spinkle vækstdrøm krakelerer

The tone has shifted from uneasy to fragile as the Middle East conflict continues to cast a longer shadow over the region. What initially looked like a relatively contained drawdown started to give way, with flows, headlines, and a clear reluctance to hold risk into the weekend all leaning the same direction. And when the bid disappears, it doesn’t take much to push things lower.

Macro surprises have turned negative in Europe, but so far, they remain resilient in the US.

Inflation expectations have moved far more in Europe.

European natural gas prices have nearly doubled since the conflict began, while US prices have risen only ~11%.

Consumer energy prices sharply up but not uniformly across Europe.

Euro area FCIs have tightened by around 40bp since the start of the war.

GS: “Our model points to a 0.4pp drag on growth this year from the energy shock.”

Model-implied peak effect of energy price shock on the level of real GDP vs. pre-conflict baseline, %.

European 0-2 year yield curve steepens sharply, while the 2-30 year curve flattens.

ECB repricing has been lifting the entire yield curve.

Weaker growth typically leads to wider deficits.

Quality stocks in Europe have significantly lagged the broader market recently.

Europe doesn’t have a structural growth story to fall back on – no AI cushion, no obvious cohort to absorb flows when macro pressure builds. Positioning reflects that reality: selling has picked up, but similar to other regions it feels more like a lack of conviction, with growing interest in hedges underscoring the discomfort. Add in a macro backdrop where central banks risk tightening into a potential growth shock and the setup looks increasingly asymmetric. For now, Europe isn’t just lagging… it’s the part of the bracket investors seem least eager to bet on.