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LGT Navigator: Is Moscow taking two steps forward and one step back?

February 16, 2022

Reports of a withdrawal of Russian troops on the border with Ukraine caused a brief easing of tensions the capital markets on Tuesday. Russia had reported that it had begun withdrawing troops in the south and west of the country following maneuvers. In addition, President Putin stressed at the meeting with German Chancellor Scholz in Moscow that Russia does not want a new war in Europe. US President Biden continues to assess the risk of a Russian invasion of Ukraine as high. In the financial markets, the mood remains tense, oscillating between hope for an easing of tensions and fear of an escalation.

Is Moscow taking two steps forward and one step back?

The Dow Jones Industrial gained +1.2% to 34'988.84 points on Tuesday and the market-wide S&P 500 even recorded a daily gain of almost +1.6%. The gains were most significant, however, on the technology exchange Nasdaq, where the indices rose by about +2.5%. Prices were driven mainly by the (vague) easing signals in the Ukraine conflict. Russia wants to continue the dialogue with the US and NATO on the security guarantees demanded by Russia.

On Asia's stock exchanges, the short-term positive trend continued for the most part on Wednesday. Today is now also likely to focus primarily on the minutes of the last interest rate decision of the Federal Open Market Committee (FOMC) of the Fed at 20:00 (CET).

NATO sees no reliable signs of de-escalation

According to the assessment of the Secretary General of the NATO military alliance, Jens Stoltenberg, no signs of a reduced Russian military presence in the border area with Ukraine have been observed so far. However, the willingness signaled by Moscow to continue diplomatic efforts is viewed positively and gives cause for cautious optimism, Stoltenberg said. The defense ministers of the NATO states will discuss the matter today in Brussels. Under consideration is the additional stationing of multinational combat forces in NATO countries such as Romania.

Investors more optimistic about outlook for Germany's economy

Financial experts regularly surveyed by the Mannheim Center for European Economic Research (ZEW) again assessed the economic outlook for Germany more confidently in February. The corresponding indicator improved by 2.6 points to 54.3 (consensus 55.0). According to ZEW President Achim Wambach, the economic outlook for Germany has further improved despite growing economic and political uncertainties.

Moderate growth of the euro economy in the final quarter of 2021

In the last three months of last year, the eurozone economy grew by +0.3% compared with the previous quarter. This confirms that economic output in the 19 eurozone countries lost considerable momentum at the end of the year. In the third quarter, euro GDP had grown by +2.3%. Growth was also unevenly distributed. Spain's GDP expanded (+2.0%), while Germany's economy, for example, had contracted by -0.7% in Q4 2021. In 2021 as a whole, the eurozone economy grew by +5.2%.

Spain's inflation rate declines slightly at the beginning of the year

In Spain, inflation remained at a high level in January, but cooled somewhat compared with the previous month. At the beginning of the year, the year-on-year inflation rate stood at +6.2% (consensus +6.0%) compared with +6.6% in December. The rise in the cost of living was again driven mainly by electricity and food prices at the beginning of the year.


Economic Indicators February 16

MEZ Country Indicator Last period
08:00 UK Consumer Prices (January, y/y) +5.4%
08:00 UK Core Consumer Prices (January, y/y) +4.2%
08:00 UK Producer Prices (January, y/y) +9.3%
11:00 EZ Industrial Production (December, m/m) +2.3%
14:30 US Retail Sales (January, m/m) -1.9%
15:15 US Industrial Production (January, m/m) -0.1%
16:00 US NAHB real estate market index (February) 83.0
20:00 US FOMC Minutes


Earnings Calender February 16

Country Company Period
SZ Clariant Annual
SZ Schindler Annual
FR Ari Liquide Annual
FR Carrefour Annual
NL Heineken Annual
NL Ahold Delhaize Annual
UK Hilton Group Q4
US Cisco Systems Q4
US Applied Materials Q1
US Nvidia Q4
US Kraft Heinz Annual


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Source: LGT Bank (Switzerland) Ltd.

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