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Stocks stabilize, but US government shutdown and oil spike cause uncertainty

Stocks markets made an attempt at stabilization mid-week after Wall Street suffered major losses on Tuesday. Major stock indices in Europe and Asia were mixed with gains and losses mostly mild. The looming government shutdown in the US remained in focus for investors while a one-year high in oil prices added to concerns.

Shane Strowmatt, LGT
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5 minutes
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US crude oil rose to 95 dollars a barrel on Thursday, the highest level since August 2022 when investors were concerned about the outbreak of the war in Ukraine and possible upcoming supply issues in Europe during the Winter. This year, tight supply - exacerbated by restrictions in Saudi Arabia and Russia - are putting upward pressure on energy costs. Investors are watching the development on energy markets closely as higher energy prices could result in another spike in inflation, causing central banks to hike rates further or leave them elevated longer.

A slight rebound in orders for longer-lasting goods in August in the US helped to brighten market sentiment slightly, even if August’s 0.2% gain comes after a 5.6% month-on-month fall in July. But worries about higher rates for longer were still dominant on Wall Street mid-week. The yields on 10-year government bonds climbed to more than 4.6% while the Dow Jones Industrial fell 0.2%. The S&P 500 ended the day roughly flat while the Nasdaq-100 gained 0.2%.

In the Asia-Pacific region, stock markets were mixed on Thursday. In Tokyo, the Nikkei 225 suffered the worst regional losses, trading down 1.7%. South Korea’s Kospi managed to squeeze out a slight gain of 0.1% while Australia’s S&P/ASX 200 was trading essentially flat. Hong Kong's Hang Seng Index lost 0.9%, while the Shanghai Composite put on 0.2%. Trading of shares of China Evergrande was suspended on Thursday. The property developer’s shares lost more than one fourth of their value during Monday and Tuesday’s trading sessions.

In Germany, consumer confidence slid again in September with the GfK Consumer Climate Study forecasting a -26.5 consumer sentiment value for October from -25.6 in September. High inflation - particularly price gains for food and energy - is causing consumers to save more and, consequently, GfK now sees essentially no chance for consumer sentiment to recovery this year. In September German business moral fell for a fifth month in a row. Europe’s largest economy has been struggling not only with stubbornly high inflation but also with weak economic growth, having suffered a recession in late 2022 and early 2023.

Corporate news in focus: Nike Q1 figures.

Economic data in focus: German Consumer Price Index (14:00 CET), US gross domestic product (14:30), US weekly initial jobless claims (14:30), Federal Reserve Chair Jerome Powell speaks at a town hall with educators in Washington, D.C. (22:00).


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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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