Flight to safety

Tensions with Russia have risen after Vladimir Putin officially recognised the two breakaway provinces around the Ukrainian cities of Donetsk and Luhansk and ordered Russian forces to be sent in to “keep the peace”. Obviously, this decision will be followed by economic sanctions against Russia and there is a high degree of uncertainty about the course and consequences of this crisis. In the financial markets, this is reflected in the continued decline in the equity markets and a sharp fall in bond yields, even though inflationary fears and the tightening of monetary policies remain as relevant as ever. The US 10-year yield is on the verge of erasing all its rise since the beginning of the month, at 1.86%. The EUR/USD exchange rate is testing the 1.13 support. The price of gold rises.

Sharp rebound in European services PMIs yesterday, confirming the recovery in activity after Omicron. US PMIs today, but also the Conference Board consumer survey in the US and the IFO survey in Germany. These are important indicators but will probably have no impact on the markets in the current context.

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January 19, 2022


Yesterday was a day of transition or “breathing space” on the markets. There was little movement on rates, which even fell slightly in the US…
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