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LGT Navigator: Saber rattling or blade sharpening?

February 18, 2022

The uncertain geopolitical situation continues to keep tension high on the financial markets and weighs on investor sentiment. A real easing of tensions in the Ukraine conflict does not seem to be materializing and the conflict remains “hot”. The White House classifies the partial withdrawal of Russian troops announced by Moscow as misinformation and instead assumes a further expansion of the military presence. If this is no longer “just” saber rattling, but if the blades are already being sharpened for an open military confrontation, the stock markets are likely to react extremely sensitively, which is why a high degree of caution is called for.

Saber rattling or blade sharpening?

On the New York Stock Exchange, the Dow Jones Industrial fell yesterday by about -1.8% and closed at 34'312.03 points at the lowest level in almost three weeks from the daily business. The S&P 500 and the indices on the Nasdaq technology exchange fell even more sharply by -2.12%, respectively by almost -3%. Risk aversion also continued in Asia, with the majority of stock indices posting losses at the end of the week. The uncertainty regarding the further development in the conflict between Russia and the West remains palpable. In addition, the stock markets continue to suffer from the imminent interest rate turnaround of the Federal Reserve.

No real signs of easing of tensions in the Ukraine conflict

The US government in Washington made it clear – in analogy to NATO – that the partial withdrawal announced by Russia on the border with Ukraine could not be substantiated. Rather, Moscow continues to expand its military presence, said US Defense Secretary Lloyd Austin. For their part, US President Joe Biden and Germany's Chancellor Olaf Scholz stressed in a telephone conversation that the risk of aggression by Russia against Ukraine still existed. The Russian Defense Ministry, on the other hand, claimed that more troops would be withdrawn.

The International Security Conference begins today in Munich. In addition to German Chancellor Olaf Scholz, the most prominent speakers over the next three days include US Secretary of State Antony Blinken, US Vice President Kamala Harris, NATO Secretary General Jens Stoltenberg and Ukrainian President Volodymyr Selenskyj. Russia, on the other hand, is not present with an official delegation for the first time in more than 30 years.

Weak economic data from the US

The Philadelphia Federal Reserve's business climate barometer, the so-called Philly Fed index, unexpectedly deteriorated sharply in February. The industrial sentiment indicator weakened by 7.2 points to plus 16.0 (consensus +20.0). A value above zero points indicates an increase in economic activity.

The US housing market also delivered weak figures yesterday. For example, the number of new housing starts at the beginning of the year declined by -4.1% month-on-month (consensus -0.4%). Things looked better for building permits, which are meaningful for future construction activity, which increased by +0.7% in January (consensus -7.2%).

Ifo quantifies the costs of the pandemic for Germany

According to an estimate by the Munich-based Ifo Institute, the corona crisis could have cost German economic output around EUR 330 billion over the past two years, not including value-added losses such as those caused by shortfalls in education. Ifo head Clemens Fuest spoke of the worst global economic crisis since the Great Depression in the 1930s.

Study confirms danger of dramatic rise in sea level

According to a study involving the US space agency NASA and the environmental agency NOAA, among others, sea levels along North American coasts are expected to rise as much in the next three decades as in the previous 100 years. Models calculate the rise to be as much as 30 centimeters above today's levels. By the end of this century, it could be as much as a dramatic one to two meters. NASA chief Bill Nelson said, “The report supports the findings of previous studies and confirms what we have known for a long time.”


Economic Indicators February 18

MEZ Country Indicator Last period
07:00 UK Retail Sales (January, m/m) -3.6%
08:45 FR Consumer Prices (January, y/y) +3.3%
16:00 EZ Consumer Sentiment (February)  -8.5
16:00 US Leading Indicator (January, m/m) +0.8%
16:00 US Existing Home Sales (January, m/m) -4.6%


Earnings Calender February 18

Country Company Period
SZ Sika Annual
SZ BB Biotech Annual
GE Allianz Annual
FR Renault Annual
FR Hermes Annual
IT Eni Annual
UK Natwest Annual
US Deere & Co Q1


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