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LGT Navigator: Hopes for de-escalation once again vanish into thin air

March 31, 2022

Hopes for a possible easing of tensions in the Ukraine conflict have once again vanished into thin air after the latest direct negotiations failed to achieve a breakthrough. Ukrainian President Selensky confirmed that there were no concrete results of the talks with Russia yet. He said the negotiation process was continuing, but so far it was just words and nothing concrete. While the latest labor market data from the US provided a positive impetus, the again increased oil prices weighed. The focus is now shifting to the monthly US labor market report due at the end of the week, which is also of decisive importance for the direction of the Federal Reserve's monetary policy.

Hopes for de-escalation once again vanish into thin air

On capital markets, hopes of a de-escalation in the war in Ukraine quickly petered out again and the mood remains one of uncertainty. On Wall Street, the Dow Jones Industrial closed -0.19% lower at 35'228.81 points at midweek after a rather directionless trading, and the broad S&P 500 declined -0.63% to 4'602.45 points. Technology indices on the Nasdaq, which had posted strong gains the day before, exited Wednesday's trading session about one percent lower. In Asia, the ongoing conflict in Ukraine and geopolitical uncertainties also weighed on stock market sentiment.

Today, Opec+ will discuss its production strategy. Energy ministers from a total of 23 countries are expected to attend the online conference. Experts expect the alliance to stick to its current line and turn on the oil tap by around 400'000 barrels (159 liters each) a day in May.

Top meeting demonstrates China's backing for Russia

For the first time since the start of the war in Ukraine, Russian Foreign Minister Sergei Lavrov has met with his Chinese counterpart Wang Yi in China. At the top diplomatic meeting, both sides stressed the quality of relations and the desire to expand the strategic partnership. The invitation to the personal talks came from Beijing. The occasion was not the Ukraine conflict, however, but Afghanistan, which is why representatives of the US, neighboring states and the Taliban government are also took part.

Continued strong employment trend in US private sector

According to the US labor market services firm ADP, job growth in the private sector remained solid in March. According to the report, 455'000 new jobs were created, driven primarily by the service sector. Job growth was already strong in February at 475'000.

Dampened mood in the eurozone

In the euro countries, general economic sentiment deteriorated significantly in March against the backdrop of the war in Ukraine. The Economic Sentiment Indicator published monthly by the EU Commission fell by 5.4 points to 108.5. Only in the service sector were the companies surveyed more confident due to the easing of the pandemic measures.

German companies will increase prices according to Ifo

According to a recent survey by the Munich-based Ifo Institute, more and more companies are planning to raise prices in the next three months. The Ifo price expectations index reached a record high of 54.6 points. Against this background, the inflation rate in Germany is likely to “rise to well over five percent” in the current year, the Ifo commented. The intention to increase prices was strongest in the food retail sector.

German industry warns of consequences of energy embargo

German industry, and especially the energy-intensive chemical industry, must prepare for a “drastic, dramatic scenario” in the event of an embargo on Russian energy supplies, warned Christian Kullmann, president of the German Chemical Industry Association (VCI). Production could come to a standstill within a few days and other sectors such as the construction, automotive and packaging industries would no longer be able to produce.

Inflation rate in Germany climbs above seven percent

Consumer prices in Germany continued to rise significantly in March. On an annual basis, the inflation rate increased from +5.5% in February to +7.3%, significantly higher than the +6.2% forecast by economists on average.

Spanish inflation rate close to the ten percent mark

In Spain, too, inflation, which was already high, continued to rise. The cost of living increased by +9.8% year-on-year in March. A drastic jump compared with the inflation rate of +7.6% in February. On a monthly basis, consumer prices rose by just under +4% on a broad basis.

  

Economic Indicators March 31

MEZ Country Indicator Last period
08:00 UK GDP Q4 (q/q, revision) +1.0%
08:00 GE Retail Sales (March, m/m) +2.0%
08:45 FR Consumer Prices (March, y/y) +4.2%
08:45 FR Consumer Spending (February, m/m) -1.5%
09:55 GE Unemployment Rate (March) 5.0%
11:00 IT Consumer Prices (February, y/y) +6.2%
11:00 EZ Unemployment Rate (February) 6.8%
12:00 OPEC Press Conference
14:30 US Initial Jobless Claims (weekly) 187,000
14:30 US Consumer Spending (February, m/m) +2.1%
14:30 US Personal Income (February, m/m) +0.0%
15:45 US Chicago PMI (March) 56.3

 

Earnings Calender March 31

Country Company Period
SZ Syngenta Annual
SWE H&M Q1
US Walgreens Boots Alliance Q2
CAN Blackberry Q4

 

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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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