Natural gas → Euro-area stocks

Common explanation (Knock-on · opposite direction): Soaring energy costs squeeze European manufacturers’ profits, especially in energy-intensive industries, most visibly in 2022; but where firms can pass costs on, share prices do not necessarily fall.

This issue: Natural gas at 60 (warm), Euro-area stocks at 83 (hot) — both above normal, not in line with the common explanation (this is an inverse link).

Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.

Where it stands now

Where the two indicators stand this issue

Natural gas: Median position across regions 60. Euro-area stocks: 50.1% above its 10-year average.

Tests

Does this link hold up?

Common explanationSoaring energy costs squeeze European manufacturers’ profits, especially in energy-intensive industries, most visibly in 2022; but where firms can pass costs on, share prices do not necessarily fallSource: European Central Bank, “Obstacles to the greening of energy-intensive industries” (2024). It uses profit margins of Belgian manufacturers, not share prices.
Tested against our dataAgreement between the positions of Natural gas and Euro-area stocks (3-month lag), measured in the direction of the common explanation: +0.41 (an opposite-direction link: the raw correlation is −0.41, and a negative correlation fits, so the sign is flipped). Looking at every 5-year period (shifted one year at a time), the two moved in that direction in 10 of 16; data start only in 2006. Weak or inconsistent
Periods when it did not holdAcross 16 5-year periods, out of step in 2006⁠–⁠2011 and 2014⁠–⁠2023.

History

The two lines, overlaid

Data: World Bank Pink Sheet (CC BY 4.0); OECD Main Economic Indicators (share prices). Positions: our calculation.

Natural gasEuro-area stocks

Limits

What this card cannot tell you

Moving together does not prove that one causes the other.
Links change over time; periods when this one did not hold are listed in full.
This is the historical record, not a forecast.

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