Russian invasion causes brief moment of fear on the markets

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The Russian flag

As expected, international stock markets initially reacted negatively to the Russian invasion of Crimea. After plummeting on Monday, prices started to rebound on Tuesday.

Adjusting for disruptions in US economic indicators caused by the relentlessly severe winter, even these numbers are relatively positive. Ben Steinebach Ben Steinebach Head of Investment Strategy

After a brief moment of fear, investors ignored subsequent developments in Ukraine. Russia occupied Crimea to protect its own interests in the Black Sea Fleet. The majority of the Crimean population supports this move, leaving the Kiev government relatively powerless and the United States and Europe with no weighty arguments for a military intervention to oust the Russian army. Investors subsequently turned their attention to the macroeconomic picture. Adjusting for disruptions in US economic indicators caused by the relentlessly severe winter, even these numbers are relatively positive. Most indicators in Europe are remarkably positive, including the Purchasing Managers’ Indices (published last week), retail sales and German industrial orders. Even ECB President Mario Draghi, who left interest rates untouched and refrained from using instruments to fight inflation, did not ruin the mood on the markets. The Chinese authorities confirmed at the People’s Congress that economic growth is still targeted at 7.5%. We believe the country has enough opportunities to achieve that target. And so the notion that China will slide into a recession – a fear that reared its head regularly last year – seems unjustified.

AEX still struggling to stay above 400
A couple of Dutch companies presented their fourth-quarter results last week. Although most of these were positive, the AEX is still struggling to remain convincingly above the 400 mark.

It was the smaller businesses that published their figures at the beginning of the results season. Heijmans construction firm and employment agency USG-People reported good results, while Vopak’s figures were in line with expectations. Heijmans’ good results confirm that the Dutch housing market is heading in the right direction. House sales and prices have stabilised and consumer confidence in general is clearly on the rise. Besides posting favourable residential construction results, Heijmans successfully turned around its commercial and industrial building figures. Evidence of the improving economic environment in the Netherlands was also visible in USG-People’s figures. Demand for specialist temporary employment, especially in the Netherlands, rose sharply in the fourth quarter (by 10%). At 7.2%, the profit margin was noticeably higher than the projected 5%. The Russian invasion of Crimea caused the AEX to tumble to 388.19 on Monday, more than 10 points lower than it was last Friday. This loss was regained fully on Tuesday, and by Thursday the AEX had risen to slightly above the 400 mark.

Industrial production in the spotlight in many countries
Another two companies will publish their results this coming week. We are also keeping a very interested eye on a number of macroeconomic indicators.

The only two companies to publish their fourth-quarter results at the tail end of the pack are Twentse Kabel Holding (TKH) and Boskalis. We think the shares of both firms are worth buying, and TKH is also on our list of highly recommended companies. On a macroeconomic level, we are eyeing a number of European countries – France, the United Kingdom, the Netherlands and the European Union as a whole – that are set to publish their January industrial production figures this coming week. These data will show whether or not the favourable development visible in business confidence has also been transferred to the production side of the economy. We expect information on the consumption side to be announced this week, too, when the Netherlands and the United States will publish figures on retail sales. The University of Michigan in the US will also publish preliminary figures on consumer confidence in March.


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