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LGT Navigator: Geopolitics continues to dominate market sentiment

March 2, 2022

The geopolitical situation remains extremely tense and nervousness on capital markets is high. Meanwhile, the war in Ukraine continues unabated and Moscow has so far been little impressed by the massive sanctions imposed by the West. The mood on stock markets thus remains depressed, and economic data and corporate news are taking a back seat. With interest, however, statements by Fed Chairman Powell will be followed today. The focus is also the regular economic report of the Fed, the Beige Book.

Geopolitics continues to dominate market sentiment

After Europe's stock exchanges posted deep red figures – the EuroStoxx 50 closed around -4% lower - the stock indices on the New York Stock Exchange also fell sharply again. The Dow Jones Industrial ended Tuesday with a loss of -1.76% at 33'294.95 points and the S&P 500 fell by -1.55% to 4'306.26 points. The negative trend also continues in Asia's stock markets and most indices are trading clearly in negative territory at the end of the day. In Tokyo, the Nikkei 225 index loses -1.7%.

The military situation in Ukraine remains confused after six days since Russia's attack. Russia continues the attack on Ukraine with unabated force and are now to be supported by troops from Belarus. The US government is planning a multi-billion dollar aid package worth around USD 6.5 billion to provide humanitarian, economic and military support to Ukraine. Australia also plans to rush to Ukraine's aid with military equipment and humanitarian aid. Financial assistance is also being offered by the World Bank. The Washington-based institution plans to provide Ukraine with a USD 3 billion aid package in the coming months.

EU to seriously consider admitting Ukraine

After Ukrainian President Volodymyr Selensky made an urgent appeal to the European Union to admit his country to the EU, EU Council President Charles Michel assured Ukraine of a serious examination of its application to join the EU. The EU will not be able to shirk its responsibility, Michel said. First, the EU would have to officially give Ukraine candidate status and then negotiate an accession agreement. The EU states would then have to unanimously agree to the admission.

Kremlin tries to justify itself

Russia's Foreign Minister Sergei Lavrov appeared by video link at the Conference on Disarmament in Geneva and defended the attack on Ukraine. The country, in Russia's view, poses a threat to international security and is seeking to arm itself with nuclear weapons. “We must respond to this real danger,” Lavrov said. In addition, Moscow continues to demand that NATO rule out further expansion to the east and provide long-term security guarantees. During the Russian foreign minister's appearance, many diplomats present left the room in protest.

Eurozone industry again more cautious

Sentiment in the eurozone's industrial sector clouded over again in February. The Purchasing Managers' Index fell from 58.7 to 58.2 points but remains well above the 50-growth threshold. On the one hand, the expiring pandemic is causing optimism, but on the other hand, companies are worried that the war in Ukraine could lead to low growth and once again increased inflationary pressure due to the uncertainty.

Inflation in Germany back above five percent

Driven by energy prices, the inflation rate in Germany climbed to +5.1% in February from +4.9% in the previous month. On a monthly basis, consumer prices rose by +0.9%.

Inflation trend in Italy intensified again

The cost of living in Italy increased again in February. On an annual basis, consumer prices rose by +6.2% last month, taking the inflation rate in the eurozone's third-largest economy to its highest level since the introduction of the euro in 1999. In January, the inflation rate had still been +5.1% and economists had expected a significantly lower increase to +5.4%. Energy costs remained the strongest driver. However, food prices also increased.

  

Economic Indicators March 2

MEZ Country Indicator Last period
08:00 GE Retail Sales (January, m/m)  -5.5%
09:00 AUT Consumer Prices (February, y/y) +4.6%
09:55 GE Unemployment Rate (February) 5.1%
11:00 GE Bundesbank President Nagel speaks
11:00 EZ Consumer Prices (February, m/m) +0.3%
11:00 EZ Consumer Prices (February, y/y) +5.1%
11:00 EZ Core Consumer Prices (February, y/y) +2.3%
14:15 US ADP Private Payrolls (February) -301,000
16:00 US Fed Governor Powell speaks 57.3
20:00 US Fed Beige Book

 

Earnings Calender March 2

Country Company Period
SZ Kuehne & Nagel Annual
SZ Bucher Annual
GE Sixt Annual
UK Aviva Annual

 

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Imprint
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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