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LGT Navigator: Escalation of the Ukraine conflict causes nervousness

February 14, 2022

The geopolitical tensions are dampening sentiment on global stock markets and are causing oil prices to rise. This week, investors are hoping for further clues of how the Federal Reserve intends to implement the interest rate turnaround. In Germany, inflation remains at a high level.

Russia-Ukraine conflict

US stock exchanges ended Friday's trading sharply lower. In the late afternoon, the White House's national security adviser stated that there were signs of an escalation on the Russian-Ukrainian border and that an invasion by Russia was possible during the Olympic Games. Investors fled from risky assets into safe havens. The S&P 500 lost almost -2% and the Dow Jones declined -1.4%. The Nasdaq Composite fell -2.8%. Also on a weekly basis, all three indices recorded a loss. 

The tense geopolitical situation is also affecting Asian stock markets. On Monday, the Nikkei loses more than -2% in Tokyo. The Hang Seng declines about -1.2% in Hong Kong and the Shanghai Composite loses -0.6%. The oil price continues to rally, however. Already on Friday, it surged about +3%. In early Monday trading, the price of a barrel of Brent climbed to over USD 96 and thus reached the highest level since October 2014.

In addition to the Ukraine conflict, high US inflation and the imminent interest rate turnaround weigh on the sentiment. This week, investors are hoping for further indications on the monetary policy of the Federal Reserve (Fed). On Wednesday, the Fed will publish the minutes of the last interest rate meeting. Furthermore, members of the Federal Open Market Committee (FOMC) will speak during the week. James Bullard, chairman of the St. Louis Fed, caused a stir last week because he had argued for a rate hike of one percentage point by July.

Inflation weighs on US consumer confidence

Soaring prices in the US are dampening consumer confidence. Consumer sentiment unexpectedly dipped in February, falling -5.5 points from January to 61.7, according to a University of Michigan survey. That is the lowest reading since fall 2011. Analysts had forecast a decline only to 67.0 points. Respondents gave a poorer assessment of the current economic situation and were also more pessimistic about the outlook than in the previous month. US inflation rose +7.5% year-on-year in January, growing at the fastest pace in forty years.

Inflation in Germany remains at a high level

In Germany, prices continue to rise unabated. Inflation rose by +4.9% year-on-year in January. This was announced by the Federal Statistical Office on Friday and confirmed an initial estimate. Thus, inflation has slowed somewhat compared to December, but remains at a high level. At the end of 2021, it had reached +5.3%, the highest level in almost thirty years. Energy prices in particular rose sharply at the start of the year. Heating oil cost more than +50% more than a year ago, and natural gas prices rose by more than +30%. Excluding volatile energy prices, core inflation was +3.2%.

In view of the high energy prices, the German Chamber of Industry and Commerce (DIHK) has lowered its economic forecast for the current year. It now expects economic growth of +3.0%, down from +3.6%. In addition to energy costs, supply bottlenecks and a lack of skilled workers are dampening the outlook.

International Energy Agency warns of rising oil prices

The International Energy Agency (IEA) warned on Friday that the situation on energy markets remains tight. Supply from oil-exporting countries and their allies (OPEC+) was 900’000 barrels per day below the agreed target in January, according to the IEA. Indeed, several countries in the alliance have repeatedly struggled to meet their production target in recent months. Saudi Arabia and the United Arab Emirates could help out in this situation and pump more crude, the IEA said. The two countries have the largest spare production capacity. High demand and tight supply have fueled oil prices in recent weeks, with quotes rising above USD 90 for the first time since 2014. 

UK economy recovers in 2021

The British economy grew significantly in 2021. According to the National Statistics Office, gross domestic product (GDP) increased by +7.5%, partially making up for the economic slump in 2020. After the outbreak of the corona crisis, GDP had contracted by -9.4%. The economy also grew in the final quarter of 2021, expanding by +1.0% compared with the third quarter.


Economic Indicators February 14

MEZ Country Indicator Last period
08:30 CH Producer prices (January, y/y) +5.1%
11:00 EZ Industrial production (December, y/y) -1.5%
17:15 EZ ECB Lagarde speaks


Earnings Calender February 14

Country Company Period
CH Temenos Q4
FR Michelin Annual
FR CapGemini Annual


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Tina Haldner, E-Mail:
Source: LGT Bank (Switzerland) Ltd.

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