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LGT Navigator: Pressure grows for EU energy embargo against Russia

March 29, 2022

Lower oil prices against the backdrop of new corona measures in China, which are likely to have a negative impact on the economy, ensured a moderately positive tenor on equity markets at the start of the week. After the G7 have rejected the payment in rubles demanded by Moscow, a main topic on the financial and commodity markets remains a possible full-scale embargo by the EU against Russian energy supplies. The EU states are not yet in agreement, but the pressure, particularly on Germany, is growing. 

Pressure grows for EU energy embargo against Russia

At the start of the new trading week, oil prices fell sharply at times. A barrel of the North Sea sort Brent and the US sort West Texas Intermediate (WTI) declined at times around -9%, down to approximately USD 109.70, respectively approximately USD 103.50. As a reason, traders cited the pandemic-related lockdown in the Chinese metropolis of Shanghai. An interruption of production could endanger the growth of the second largest economy. The war in Ukraine also remains in focus. Today in Istanbul, the warring parties are to hold talks again. On the part of Ukraine, it was said that a neutrality demanded by Russia would be thoroughly examined.

On Wall Street, the indices of standard stocks turned positive shortly before the close of trading. The Dow Jones Industrial closed +0.27% higher at 34'955.89 points, just below the 35'000-point mark. The broad S&P 500 gained +0.71% to 4'575.52 points. Technology stocks were in demand at the beginning of the week. On the Nasdaq technology exchange, the indices extended their gains and closed around +1.6% higher. Shares of electric car manufacturer Tesla rose by almost +8% after the company will seek investor approval for a stock split. In the bond market, the yield on ten-year US government bonds traded slightly lower at 2.46%.

In Asia, stock market barometers trended inconsistently on Tuesday. In Tokyo, the 225-stock Nikkei index traded +0.75% higher, while the Japanese yen fell to a six-year low against the US dollar.

G7 say “nyet” to ruble payments

The G7 countries rejected demands from Moscow to settle Russian gas deliveries in rubles. This would represent a unilateral and clear breach of existing agreements. Russian President Vladimir Putin had announced last week that gas deliveries to “unfriendly states” would only be invoiced in rubles instead of euros or US dollars. The Kremlin hopes that this will support the Russian currency, which has come under heavy pressure. Moscow could now increasingly threaten to halt deliveries. German Economics Minister Robert Habeck stressed that Germany and the other G7 countries were prepared for all scenarios. Germany currently holds the G7 presidency.

Japan supports economy with further fiscal package

Japan's government announced a further stimulus package of around EUR 800 billion to cushion price increases resulting from the conflict with Russia. Japan is poor in raw materials and dependent on oil imports Rising prices are increasingly jeopardizing the economy's recovery from the corona pandemic, and the recent weakness of the yen is making the price of imports even more expensive.


Economic Indicators March 29

MEZ Country Indicator Last period
08:00 GE Retail Sales (February, m/m) +2.0%
08:00 GE GfK Consumer Climate (April) -8.1
08:45 FR Consumer Sentiment (March +98.0
15:00 US S&P/CaseShiller House Prices 20 biggest cities (January, y/y) +18.6%
16:00 US Consumer Confidence (March) +110.5


Earnings Calender March 29

Country Company Period
SZ Adecco Capital Markets Day
GE Porsche SE Annual
FR Scor Investor Day
US Micron Technology Q2


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