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Stocks pressured by concerns about economic growth

Stock markets continued to suffer on Thursday due to inflation concerns, rekindled by higher oil prices. Rising inflation could force the Federal Reserve to leave interest rates at high levels for longer, thus putting an additional brake on the already weakening economy. At the same time, shaky trade data out of the Asia-Pacific region corroborated concerns about global growth.

Shane Strowmatt, LGT
Reading time
5 minutes
Stock market indices
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In Asia, stock markets were mostly lower in early Thursday trading. In China, both exports and imports dropped in August, with exports falling 8.8% following a 14.5% slump in July, signalling a stark slowdown in international demand for goods from the world’s second-largest economy. Hong Kong's Hang Seng Index dropped 1.1%, while the Shanghai Composite fell 0.7%. Trade data from Australia confirmed the weak outlook for global commerce with exports falling 2% in July and Australia’s trade surplus falling by nearly one third. Australia’s S&P/ASX 200 lost 1.3%. In Tokyo, the Nikkei 225 was down 0.7% and in South Korea, the Kospi lost 0.8%.

In the US, macroeconomic data looked somewhat brighter than what was coming out of Asia. The Institute for Supply Management’s Services Purchasing Managers’ Index increased to 54.5 points in August, its highest level in the last half of a year. Results of more than 50 points indicate expansion. Consumer demand has remained strong in the US, helping to support the economy and fuelling hopes that the world’s largest economy may be able to avoid falling into a recession this year.

In New York, stock indices could nevertheless not escape the negative sentiment. The Dow Jones Industrial lost 0.6% and the S&P 500 ended Wednesday’s session down 0.7%. The Nasdaq-100 led losses, down 0.9%.

In central banking news, the Bank of Canada kept its overnight lending rate at 5% but signalled willingness to continue hiking if needed to reach the central bank’s 2% inflation target. Interest rate decisions from the European Central Bank and Federal Reserve are due later this month.

The negative economic data out of Europe kept flowing in midweek, with industrial orders in Germany falling by 11.7% in July when compared to the previous month. A projection released Wednesday for the coming months also depicts a weak year as a whole for Europe’s second-largest economy. The Kiel Institute released its forecast on Wednesday and now expects the German economy to shrink by 0.5% this year. Previously, it had expected a 0.3% contraction. Weak industrial activity, problems in the construction sector and low consumer spending were cited as the main reasons for the contraction. The Kiel Institute expects 1.3% growth in 2024 and 1.5% in 2025 for Germany. The DAX finished the day down 0.2% and the Euro Stoxx 50 lost 0.7% on Wednesday.

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: Swiss unemployment rate (07:45 CET), German industrial production (08:00), France trade balance (08:45), Swiss foreign currency reserves (09:00), gross domestic product euro area (11:00), US weekly initial jobless claims (14:30), weekly EIA Petroleum Status Report (16:30).


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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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