Market outlook IG Europe

With the Russian/Ukrainian crisis unfolding, European growth is expected to slow very sharply, but as of now, we don’t expect an outright recession unless there is a material curtailment of gas supplies from Russia to Germany. To offset the cost of higher energy and commodity prices, as well as to accelerate the energy transition, European governments are expected to support industries with a broad-based fiscal stimulus package. Finally, we note that the European Central Bank will be more patient in raising rates, keeping the monetary cushion largely in place. All this is supportive for EU corporate bonds, but the time to recovery could be longer than expected.