A supply chain nightmare could hit the EU soon ahead of Christmas

 A supply chain nightmare could hit the EU soon ahead of Christmas

A supply chain nightmare could hit the EU soon ahead of Christmas.

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The EU is gearing up for supply chain problems, which together with elevated inflation and a global energy crisis could set off alarm bells for the markets. With Halloween right around the corner, followed by the Christmas spending spree, this could potentially grow into a nightmare for companies, investors and consumers alike.

Although last week European stocks performed remarkably well, marking the best week in the last seven months, the ‘winning streak’ could end soon for investors, according to Bloomberg. Ahead of the EU’s third-quarter earnings season, well-known European clothing companies such as Asos, Puma, H&M and Boohoo are about to face supply bottlenecks and rising input prices.

As of 9:35 a.m. London time, the Stoxx Europe 600 fell 0.4% and the euro fell 0.1% to $1.1586. Boohoo and Asos shares plunged after Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International said that he expects companies to struggle with supply constraints. However, Boohoo, Asos and Zalando stocks rebounded later on Monday.

The post-pandemic bottlenecks include logistics problems such as a shortage of lorry drivers and general labour shortages which raise the costs for companies. In the UK the situation is exacerbated by Brexit, resulting in a shortage of 100,000 truck drivers, but also by a lack of butchers and abattoir workers. British farmers have warned that they might be forced to kill 120,000 pigs because of an acute shortage of butchers and slaughterers. 

Some firms will be able to pass the rising costs on to customers, but others will need to cover them. How could this impact Europe’s retail giants? Investors will be watching very closely the earnings results from Puma, Asos and Zalando coming up in the next few  weeks.

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