ON DECK FOR TUESDAY, FEBRUARY 22
KEY POINTS:
- Markets take Russian provocations in stride
- Sanctions awaited, amid signs of mixed appetite for severity
- German business confidence builds upon global PMI signals
- US consumer confidence highlights US releases on tap
- Global COVID-19 charts
- Global Week Ahead
Developments to start a holiday-shortened week in most of N.A. are squarely focused upon Russia and Ukraine following Putin’s recognition of separatist regions in Ukraine and the dictator’s decision to send troops to those regions as an act of provocation that furthers his prior false flag maneuvers. The west is preparing sanctions, but with plenty of evidence of divisions and uncertainty toward how severe they may be. Russia’s foreign secretary was dismissive saying that “well, we’re used to it.” Germany has halted approval of the Nord Stream 2 pipeline which they arguably should have never allowed in the first place. Italy’s Draghi says sanctions need to be limited, targeted and should exempt gas given Italy’s dependence upon Russian gas. The EU, US and UK are preparing sanctions that may be revealed today, and the EU requires all member states to approve them.
So far, the effects upon markets are relatively mild outside of oil’s inflationary impulses. Oil prices are up by about US$2–3 per barrel. US equity futures are down by up to ½% (Nasdaq) but the moves across the S&P500 and TSX are minor so far after yesterday’s -¾% declines by the S&P500 and the TSX. European cash markets range from down ¼% in Germany to up ¼% in London. US Treasuries are bear flattening with 2s about 6–7bps cheaper and the longer end is only slightly cheaper. Flattening moves are also driving gilts and bunds. The USD is slightly weaker this morning but generally little changed since Friday’s close despite the developments in Ukraine.
For Canadians and Americans returning from the long weekend the only other updates included a round of global PMIs that arrived yesterday morning and on Sunday evening. They showed encouraging signs in support of an omicron rebound with improvements in the Eurozone, UK and Australia, while Japan fell. They are nevertheless being treated as stale given the geopolitical developments.
The only overnight release was Germany’s IFO business confidence for February that posted significant improvements to current and expectations components.
On tap today will be a few US releases with the main emphasis upon the Conference Board’s measure of consumer confidence (10amET). US Markit gauges are due shortly before that, but are not widely followed partly because Fed prefers the ISM measures that are geared toward the domestic US economy and hence the Fed’s mandate.
Please see the weekly update of global COVID-19 trends in hospitalizations and deaths that continue to decline in several major regions.
Please also see the Global Week Ahead here and your inbox for the related chart deck. The deck was updated to account for developments into Monday evening.
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