Mary Nicola, Senior Vice President and Global Multi-Asset Portfolio Manager at Pinebridge Investments, says the potential for an energy crisis in Europe this winter is a key focus for markets. 

Washington

Russian forces have invaded Ukraine from land, air and sea with strikes causing widespread damage. Global leaders have condemned the move and imposed sanctions.

Ukraine Invasion

Russia has been hit by global sanctions following President Vladimir Putin's decision to invade Ukraine.

Russian Sanctions

Inflation across the developed world is surging, with the rising cost of living expenses at the highest level since the 1980s.

Global Inflation Concerns

European Energy Crisis Key Focus For Markets

What I like about the day, the view that you got. We got the slightly improved Chinese data, it's done. Nothing to bolster risk this morning but I like your portrayal. China is the wildcard. But is it an Ace of Spades in the pack? I think what the key thing here about China is, obviously, we have two were still concerned about the zero covid policy, which makes it very difficult in terms of finding a really robust recovery. But at the same time, we're dealing with the West, which is we're seeing slow-moving deterioration, so we're seeing a slow improvement from China, but yet in the west were seeing this blows at your irrigation especially and the likes of Europe or in the UK. Do you expect Europe's slow deterioration to materially accelerate given? For example, the guides with just had from FedEx. We do, especially as Global demand is Flowing. There's some Outlook in terms of extra Outlook my weekend, Global demand is weakening, you can see it in some of the export data that's coming out of the Asia which is sort of a litmus test for our viewing, in terms of export, demand, Global demand recovery. But also the key thing for Europe, right now is just what the concern is about. A potential, potential energy crisis in the winter. This is Keith seems to continue to be the key Focus for markets is how the Eurozone will be able to manage such a feat. Is this morning question, they're going for profits, grab as opposed to a price cap. We understand that the moment the construct of the of the help that's coming has material. I helped at gas, right? Outside. Electricity prices, retrace from those vertical Highs, but is it enough to Monica slow down? You expect how do you position for that? Mary is it a short view on the currency? Is that a more defensive Equity position? Is it a reduction in credit exposure in Europe? Yeah, for us, actually, we've been quite cautious on the Euro for quite some time and that's been one of our key convictions in terms of, you know, within the multi-asset world in terms of how to best display a best for Trey. What we're looking at the we've been in terms of how we looking at European equities, we haven't been in terms of anything in terms of taking on any European Equity exposure. But the key thing that we're doing is in terms of being very, very cautious on the Euro and that obviously has worked in our favor. But the key thing here is is, is the fact that we're still not could potentially could be at our worst you again, if winter comes, you have a colder than expected winter. The impact could potentially be quite damaging for the Eurozone where we could see a potential recession, where we could see the Euro. The ECB being forced to hike, more aggressively temper, and demand more than usual. And then, of course, having a greater impact on a run on recessionary concerns for the Eurozone. So for us, if we still think that the Stationary risks for the Euros over make clay remain quite High. Before we moved to the narrative, from the fat married, do you have a a building consensus various people to come in? And they said that they think the musculature of the dollar the demise of the Eurozone. Growth story will take Diridon to know, 90s, do you have a Target bond with on the Euro at that? You think it is the pain, the pain threshold. You don't, potentially, if we get to a point in in the Eurozone crisis or we get, we get an energy crisis within Europe and it within the Eurozone, we could see, you do new all-time lows within within Euro. So, we've already seen it a dip below, parity? That was the key thing that everyone was watching. Now, it's potentially could be even more downside on the potential of any sort of energy crisis within the Eurozone. Do something around, 90 doesn't look very far-fetched anymore. Okay, that's frightening. I'm one narrative and word that I've said, have leaned on this week is the muscularity of the dollar. It's very unrelenting post. CPI is not what I want to ask you, is around the Dynamics of the bull market and the FED funds, even in the eyes of a tragic. I'd lick from FedEx, Mary fed funds, I moved from 4 to 4 and a half percent this week. Nothing nothing seems to be in the way of the 75 to 100 basis. Point narrative in the bond market, is it Folly to even think of 100 basis point hike in the next meeting. We can't rule it out. I think after the Jackson Hole said, a very different tone for the market. If you would call in July the FED headed, the markets, have interpreted. What the FED has said as being slightly more dovish, that they would take a pause Jackson Hole reverse that and saying that you know they're fully fully focused on inflation and managing inflation expectations and where are going to look at some of the stick. Your pockets of inflation. What we saw in the CPI report is that the stick your pots of and faced insulation where they have been quite concerned about, that's what is crucial and that's what's going to be for it to remain on the front front lines for for the Fed. So on that note you don't 100 basis points. Can't be ruled out especially if they see inflation. Prince. Continue to push higher, especially with core inflation, not stabilizing as much as they would like to see it. So the market has moved in that direction. Expecting that the FED will be aggressive and Continue to see that the FED will continue to be aggressive as it remains laser-focused on inflation.

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Ukraine Invasion

Russian Sanctions

Global Inflation Concerns