Financial markets/economy
Financial capital flight from Europe
- 243
- 0
The difficult situation and the risk of a recession in the European economy has not left financial market operators indifferent. As noted by Refinitiv, whose data were reported by 'La Stampa' in a useful article by Fabrizio Goria, we are witnessing a substantial withdrawal of capital from the Old Continent.
The balance is negative and amounts to -68 billion dollars since the beginning of 2022, -72 billion since the beginning of the Russian war in Ukraine. As Goria points out, the perception of risk is generalised, in the sense that it does not concern a specific asset class. First, there is certainly a substantial outflow from the stock market. However, ETFs have also been hit by outflows of USD 10 billion. Goria also quotes Goldman Sachs economist Isabella Rosenberg's analysis: Western Europe has been losing investment capital for 24 weeks now in both the equity and bond segments.
To complete the picture, there is the figure from the IIF (Institute of International Finance): American funds have invested as much as USD 25 billion on a further weakening of the euro. Generally speaking, it is not very comforting to read the many companies mentioned by Goria (from Wells Fargo to Nordea, from Blackrock to Bridgewater and Morgan Stanley) who believe that the situation in Europe is not only unlikely to improve any time soon, but could even get worse. This is why investors seem to be betting on liquidity or assets outside Europe.
Indeed, there is no shortage of reasons for concern in Europe. The energy crisis is increasingly squeezing corporate profits and affecting household budgets. The risk of many companies approaching bankruptcy due to energy prices and falling demand is real. At the same time, central banks can no longer afford the monetary policy to support the economy that, for example, they implemented during the pandemic. In a clear example of a vicious circle, the withdrawal of capital by investors could be a further element of economic and financial destabilisation.
Read also:
BlackRock: recession is coming