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LGT Navigator: Russia's attack sends shockwaves through financial markets

February 25, 2022

Prices plunged on international stock markets on Thursday following Russia's attack on Ukraine. The leading European index EuroStoxx 50 lost more than five percent at times and fell to its lowest level since March 2021. In New York, however, the indices then stabilized. Some relief was provided by a slight easing in the oil price. After reaching nearly USD 106 per barrel, the highest level since 2014, the price of Brent oil fell back to around USD 101. Meanwhile, corporate news and economic data took a back seat in view of the war in Ukraine.

Russia's attack sends shockwaves through financial markets

On financial markets, the nervousness is palpable and stock indices around the world went into a tailspin yesterday, while assets considered safe haven, such as gold, posted significant advances. The big question now will be whether the sanctions threatened or already established by the West will impress the Kremlin. One of the strongest weapons remains Russia's exclusion from the international payments system Swift. However, the West has so far been reluctant to use this sanction.

Again, somewhat lower oil prices provided relief on Wall Street after the turbulence of recent days for the time being. The Dow Jones Industrial had initially still fallen to the lowest level since March 2021, but then recovered and went out at 33'223.83 points (+0.28%). The broad S&P 500 rose by an even stronger +1.5% to 4'288.70 points. Most in demand were technology stocks and so the indices on the Nasdaq technology exchange posted daily gains of almost +3.5%. At the same time, the yield of ten-year US government bonds climbed again to 1.96%, after the yield had collapsed on Thursday to 1.84%.

In Asia, the stock indices largely followed the positive guidance from the US. In Tokyo, the Nikkei 225 gains just under +2%. However, given the longer-term impact of sanctions against Russia and the high level of uncertainty, it remains questionable whether this rapid recovery will be sustainable. Thus, US stock futures already indicate renewed losses in Asian trading this morning.

NATO rules out military support for Ukraine

Secretary General Jens Stoltenberg condemned Russia's invasion of Ukraine as a “brutal act of war,” but made clear that the alliance would not send NATO troops to Ukraine even after Russia's invasion. The collective defense commitment applies only to NATO countries, he said, and there can be no absolute security guarantees for NATO allies. NATO leaders will hold a special meeting on Friday. Meanwhile, NATO has activated defense plans for Eastern Europe, giving NATO High Command broad powers such as requesting and deploying more troops. Any measures, however, should be "preventive, proportionate and non-escalatory.”

Western allies with comprehensive sanctions

The 27 EU states agreed in principle on new sanctions against Russia at their crisis summit. The European Union adopted a comprehensive package of sanctions against Russia, but left out its strongest weapon, the exclusion of Russia from the international payment system Swift. EU leaders also called on the Kremlin to immediately cease military actions, unconditionally withdraw all forces and military equipment from the entire territory of Ukraine, and fully respect Ukraine's territorial integrity, sovereignty, and independence. Meanwhile, France's President Emmanuel Macron is trying to influence Russian leader Vladimir Putin through direct talks.

The EU Commission assured that gas supplies in the EU are secure despite the escalation. Several countries were able to increase their liquefied gas supplies to the EU, it said. Norway, Azerbaijan, Egypt, and Nigeria were named. The EU meets nearly a quarter of its energy needs with gas, of which about 90% is imported. About 40% of imports come from Russia, according to the Brussels executive.

At an emergency meeting at the UN Security Council tonight, the US is seeking a resolution against Russia. The resolution is intended to reaffirm Ukraine's sovereignty and territorial integrity, as well as its independence and unity, and to demand that Russia immediately withdraw all troops and respect the Minsk Agreement. However, since Russia itself is one of only five states on the Security Council with veto power, this plan is doomed to failure.

Russia's central bank rushes to the aid of banks

The Russian central bank issued a guarantee to domestic commercial banks affected by Western sanctions for all their transactions in rubles as well as foreign currencies. All banking transactions with customers in rubles would continue as usual and the payment of balances in foreign currencies would also be guaranteed.

US economy with stronger-than-expected final quarter of 2021

US gross domestic product expanded at an annualized rate of +7.0% in the fourth quarter. This means that economic growth was slightly stronger than previously assumed at +6.9%. This was mainly due to strong growth in exports and higher consumer spending.


Economic Indicators February 25

MEZ Country Indicator Last period
08:00 GE GDP Q4 (q/q, revision) +1.7%
08:45 FR GDP Q4 (q/q, revision) +3.1%
08:45 FR Consumer Prices (January, y/y) +3.3%
10:00 IT Business Sentiment (February) +113.9
10:00 IT Consumer Confidence (February) +114.2
11:00 EZ Economic Sentiment (February) +112.7
11:00 EZ Business Climate (February) +1.81
11:00 EZ Consumer Confidence (February) -8.8
12:15 EZ ECB President Lagarde
14:30 US Consumer Spending (January, m/m) -0.6%
14:30 US Durable Goods Orders (January, m/m) -0.7%
16:00 US Consumer Confidence (February) 67.2
16:00 US Pending Home Sales (January, m/m) -3.8%


Earnings Calender February 25

Country Company Period
SZ Swiss Re Annual
SZ Holcim Annual
GE BASF Annual
FR Valeo Annual
US Foot Locker Annual


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