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LGT Navigator: Russia resumes gas deliveries

July 21, 2022

Today, financial markets will focus on the interest rate decision of the European Central Bank. The resumption of gas supplies by Russia is likely to provide relief. In Italy, meanwhile, the government crisis is heating up.

Gas pipeline

On Wall Street, the upward trend continued on Wednesday. However, the mood was muted compared to the previous day. The S&P 500 advanced +0.6% and the Dow Jones gained +0.2%. The Nasdaq Composite climbed +1.6%, supported by the quarterly results of Netflix (+7.4%), which were better than feared.

The Asian stock exchanges are showing a mixed picture on Thursday. In Tokyo, the Nikkei gains +0.3%. The Bank of Japan (BoJ) has left key interest rates unchanged as expected. In Hong Kong, the Hang Seng loses almost -1% and the Shanghai Composite declines -0.5%.

Two events are dominating financial markets today. First, investors are waiting for the interest rate decision of the European Central Bank (ECB), which will be published at 2:15 pm. An interest rate hike is expected to be certain. Second, following scheduled maintenance work, the Nord Stream 1 gas pipeline is due to start supplying natural gas from Russia to Europe again from today. 

Power play over Europe's energy supply

Gas deliveries through the Nord Stream 1 gas pipeline resumed on Thursday morning. It will take some time before full transport capacity is reached, a spokesman for Nord Stream AG told Deutsche Presse-Agentur. According to the statement, about as much gas is currently flowing as was announced before the maintenance, or about 67 million cubic meters per day. This corresponds to about 40% utilization of the maximum capacity.

About ten days ago, gas deliveries through the Nord Stream 1 pipeline were stopped to carry out routine maintenance work. Europe feared that Moscow could use the opportunity to reduce or even completely halt energy deliveries. Indeed, Russian President Vladimir Putin said Wednesday that Nord Stream 1's delivery capacity could be cut again because maintenance on some turbines was slower than planned. Russia had already cut energy supplies by 60% before the work began, citing technical problems. The EU Commission, meanwhile, says it is preparing for the worst-case scenario, namely a complete halt to Russian gas supplies. Thus, it is working on an emergency plan to enable exceptional and rapid measures to be taken to save gas.

Government crisis in Italy heats up

In Italy, Prime Minister Mario Draghi won a vote of confidence in the Senate on Wednesday evening. In the process, 95 parliamentarians backed the 74-year-old, while 38 voted against him. However, many parliamentarians did not take part in the vote at all. Draghi's three major coalition partners, Lega, Forza Italia and the Five Star Movement, walked out of parliament ahead of the vote of confidence. Observers now believe it is likely that Draghi will resign.

Cost of living in the UK on the rise

Inflation in the UK rose again in June. Compared to the same month last year, consumer prices rose by +9.4%, as the statistics office announced on Wednesday. This is the highest rate since the start of data collection in 1997. According to a back calculation by the statistics office, inflation has last been higher in 1982. The Bank of England has raised interest rates several times since November in an effort to curb price growth. Currently, the key interest rate stands at 1.25%. 



Economic Indicators July 21

MEZ Country Indicator Last period
05:00 JP Bank of Japan, interest rate decision
14:15 EZ European Central Bank, interest rate decision
14:30 US Philly Fed Index (July) -3.3


Earnings Calender July 21

Country Company Period
CH Givaudan Q2
US Philip Morris Q2
CH Roche Q2
CH Temenos Q2
FL UPM-Kymmene Q2


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