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Fed inflation indicator and US consumer sentiment fuel interest rate fears

According to the latest data, inflation in the USA firmed up again at the beginning of the year and consumer sentiment brightened, which in turn increased interest rate concerns on capital markets. Against this backdrop, the mood on stock markets remains depressed. Changes will be made to the constituents of Germany's major stock indices on the Frankfurt stock exchange today. This week, the focus is once again on a series of corporate results from Europe. In addition, Commerzbank is making a comeback on the Frankfurt Stock Exchange today, replacing gas company Linde in the DAX.

Alessandro Fezzi, LGT
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5 minutes
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On the New York Stock Exchange, the Dow Jones Industrial dropped by 1.02% to 32,816.92 points on Friday, thus limiting the even greater losses during the day. The Dow was down 3% for the week, falling back to pre-Christmas levels. The broad S&P 500 closed 1.05% lower at 3,970.04 points and on the Nasdaq technology exchange the indices fell by 1.7% before the weekend. On the bond market, the yield on ten-year US government bonds remained close to the 4% mark at 3.94%.

In Asia, stock markets started Monday mostly negative. In Tokyo, the Nikkei 225 fell minimally, by around 0.1%. In Hong Kong, the Hang Seng tech index posted a daily loss of almost one per cent. On the Chinese mainland, the Shanghai Composite slipped 0.3% and the Shenzhen Component fell 0.7%. China's central bank maintained a moderately "dovish" tone in its quarterly report and reaffirmed its current monetary policy stance.

Fed inflation indicator points to continued price pressure

At the beginning of the year, the PCE price index, which is calculated on the basis of consumer spending, turned out to be much higher than expected. The price index, which is monitored by the US Federal Reserve (Fed) as an inflation indicator, rose by 5.4% year-on-year in January (consensus 5.0%). In addition, the annual rate for December was revised upwards from 5.0% to 5.3%. This means that the US monetary policy stance is likely to remain restrictive. As was also reported on Friday, US consumer spending rose by 1.8% in January, more than anticipated (consensus 1.4%). At the same time, Americans' incomes did not rise as much as expected at the beginning of the year, increasing by 0.6%.

Improved consumer sentiment should boost consumption and inflation in the US

According to the latest survey results from the University of Michigan, consumers in the US were more optimistic than expected in February. The consumer confidence index climbed from 64.9 points in January to 67.0 points, the highest level since the beginning of 2022.

Consumer sentiment in Germany continues to recover

German consumers were more confident about the economic development in Germany. According to the Nuremberg-based consumer research company GfK, the consumer climate barometer calculated for March improved by 3.3 points to minus 30.5 points. "Consumer pessimism is visibly fading," GfK commented.


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi,
Source: LGT Bank (Switzerland) Ltd.

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