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The Unstoppable Rise Of European Power Prices

1. Recession Could Soon Become Reality

- Despite recent attempts to redefine the concept of economic recession, economic data firmly points to the inevitability of one amidst soaring inflation, weakening manufacturing, and generally worsening purchasing power.

- Going back into history, the US economy has always experienced a recession within two years of every quarter when inflation was above 4% and unemployment was below 5%, and even the IMF questioned the narrative of the global economy avoiding one this time around.

- Usually a rock-solid recession litmus test, US Treasury yield curves have inverted and the spread between 2-year and 10-year bond yields hovers around -20 bps, the most inverted since 2000.

- The IMF expects that global growth could slow to 2% next year, a level effectively amounting to a recession given underlying population growth.

2. European Power Prices Go Haywire

- The decommissioning of another turbine at Gazprom’s Portovaya compressor station has brought Nord Stream 1 pipeline gas flows to some 20% of nameplate capacity, sending European gas and power prices soaring.

- Even if the much-talked-about turbine does arrive in Russia, it seems that Gazprom will not be pumping gas at a rate higher than 40%, implying the squeeze will be long-term.

- German power contracts have soared to record highs this week, with the baseload Q4 contract hovering around €475 per MWh, with the year-ahead…

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