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Clouded consumer sentiment fuels hopes for more moderate monetary policy

A surprisingly sharp drop in consumer confidence in the US fueled hopes on the stock markets that the Federal Reserve could pause again at its next decision in September or leave key interest rates unchanged. This gave a particular boost to interest rate-sensitive technology stocks. A surprisingly strong decline in job openings in the US could also indicate a more cautious stance of the Fed. Stock exchanges in the Asia-Pacific region today largely mirrored the movements on Wall Street. 

Alessandro Fezzi, LGT
Tempo di lettura
5 minuto
US consumer confidence
© Shutterstock

In Tokyo, the Nikkei 225 gained 0.5% on Wednesday, gaining for the third day in a row. The Kospi in South Korea rose 0.71%, while the Kosdaq added 0.6%. Hong Kong's Hang Seng index traded 0.75% higher, while mainland Chinese markets were also higher, with the benchmark CSI 300 index up 0.4%. However, gains in Asia were led by the Australian stock market. The S&P/ASX 200 climbed 1.1% after the release of the latest inflation figures. Headline inflation was 4.9% in July, down from 5.4% in June. 

On Wall Street, stock indexes continued their recovery for the third day in a row. The Dow Jones Industrial closed 0.85% higher at 34,852.67 points and the market-wide S&P 500 gained 1.45% to close at 4,497.63 points. The positive mood on the trading floor was driven primarily by technology stocks. Thus, the Nasdaq 100 rose on Tuesday by 2.15% to 15,376.55 points. Buying sentiment was provided by domestic economic data, which fueled hopes that the U.S. Federal Reserve Fed could leave interest rates unchanged at its September meeting. The consumer confidence determined by the market research institute Conference Board showed a significant decline, as did the number of job openings in the US. The Nasdaq indices, which are dominated by technology stocks considered particularly sensitive to interest rates, benefited most from this. The weakening at the beginning of trading US government bonds turned after the US economic data into the plus and in turn, the yield for ten-year Treasuries gave way to 4.12%. 

The Labor Department in Washington reported yesterday that the number of job openings in the U.S. fell sharply to 8.83 million in July from 9.17 million in June. The July figure was the lowest since March 2021. The so-called "Jolts" report could signal a slowdown in the labor market, which in turn could force the Federal Reserve to exercise restraint regarding further interest rate hikes. Investors are already eyeing the monthly U.S. labor market report expected on Friday. Another argument for a more moderate monetary policy stance was provided by an unexpectedly sharp deterioration in consumer sentiment in the US. According to the New York-based market research institute Conference Board, the consumer confidence indicator fell by 7.9 points to 106.1 points in August, while economists had on average expected an improvement to 116.0 points. 

Consumer sentiment also deteriorated in Germany and France in August. Nuremberg-based consumer research company GfK commented that both economic and income expectations and propensity to buy were down. Accordingly, the chances of a sustained recovery in consumer sentiment before the end of the year are dwindling. At the same time, the French statistics office Insee is also observing a deterioration in consumer sentiment in the second-largest economy in the euro zone. At 85 points, the consumer climate barometer remains well below the long-term average of 100 points.

Corporate news in focus: Lego with half-year figures and from the US Salesforce with Q2 figures.

Economic data in focus: Switzerland KOF business barometer August (09:00 am), Spain consumer prices August (09:00 am), Italy consumer confidence August (10:00 am), Eurozone consumer confidence and economic and industrial sentiment August (11:00 am), Germany consumer prices August (02:00 pm). From the US.: ADP Employment Report August (02:15 pm), GDP Q2 (second release, 02:30 pm) and Pending Home Sales July (04:00 pm).

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