Skip navigation Scroll to top
Scroll to top

LGT Navigator: Fed reaffirms its patient attitude

May 23, 2019

The US Federal Reserve (Fed) reaffirmed its wait-and-see stance on monetary policy. A "patient approach is still appropriate for some time to come" according to the minutes of the last interest rate meeting of the Open Market Committee (FOMC) on 1 May, published yesterday.

Federal_Reserve_optimiert

The minutes confirmed recent statements by central bank president Jerome Powell who considers the interest rate level to be appropriate with regard to economic and inflation developments. Recently there has been increased speculation on the capital markets about a possible rate cut by the Fed. This is due to weak global economic trends, numerous political risks – in particular the trade conflict between the US and China –, and continued moderate inflationary pressure. This assessment was also supported by statements made by James Bullard, Head of the Fed of St. Louis, who is currently entitled to vote in the central bank's Open Market Committee. Bullard stressed that the Fed could cut key rates even in the event of a sustained economic upturn if inflation remained below the Fed's target of two percent. Bullard believes that such a move would enable the central bank to strengthen confidence in the inflation target. The Fed is currently holding its key interest rate within a range of 2.25 to 2.5 percent.

Huawei case continues to cause tensions

Investor sentiment remains tense. The main reason continues to be the latent uncertainty regarding a potential further escalation of the trade conflict between the US and China. The US government should now consider imposing restrictions on other Chinese companies similar to those imposed on telecommunications supplier Huawei. In the meantime, Huawei is coming more and more into distress. Yesterday the British chip developer ARM (part of the Japanese technology group Softbank) discontinued any cooperation with Huawei. ARM's chip architectures form the basis of the processors in almost all of today's smartphones and tablets –including Huawei's chips developed in-house. The background is that ARM's chip designs also include technology from the US, meaning that all business with Huawei falls under the US boycott. Under the massive pressure of the American sanctions, Huawei now wants to have its own operating system ready for use by next spring at the latest. On Wall Street, the Dow Jones Industrial closed with a minus of -0.4% and the broad S&P 500 with a minus of -0.3%. In Asia, too, most stock market indices tended southwards in view of the persistent trading tensions.

May doesn't admit defeat

British Prime Minister Theresa May announced yesterday that she would be voting on her Brexit deal in London for the fourth time in the first week of June. May also promised a second Brexit referendum. In Westminster, the first reaction to May's plans was promptly negative and the British pound fell against the US dollar to a new low in four and a half months. Former Foreign Minister Boris Johnson, who himself wants to chair the Conservative Party, as well as numerous members of parliament, have already announced their intention to vote against May. According to a newspaper report, members of the lower house of parliament are preparing a new vote of no confidence against May. The Brexit has been keeping the British, Brussels and capital markets on their toes since the historic vote in June 2016.

Economic Indicators May 23

MEZ Country Indicator Last
08:00 GE GDP (Q/Q) +0.4%
08:45 FR Business Climate Index 105.0
09:15 FR IHS Markit PMI Composite 50.1
09:30 GE IHS Markit PMI Composite 52.2
10:00 EZ IHS Markit PMI Composite 47.9
10:00 GE Ifo Business Climate Index 99.2
14:30 US Jobless Claims 212,000
15:45 US IHS Markit PMI Composite 52.6
16:00 US New Home Sales (M/M) +4.5%

Earnings Calendar May 23

Country Corporate Period
US Medtronic Q4

 

 

Follow us on TwitterFacebook or LinkedIn, where we inform you about latest market developments and LGT News. Further informationen is available on: LGT Social Media.

LGT Research Publications subscription 

Imprint
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

Risk Disclosure (Disclaimer)
This publication is an advertising material / marketing communication. This publication is for your information only and is not intended as an offer, solicitation of an offer, or public advertisement to buy or sell any investment or other specific product. Its content has been prepared by our staff and is based on sources of information we consider to be reliable. However, we cannot provide any confirmation or guarantee as to its being correct, complete and up to date. The circumstances and principles to which the information contained in this publication relates may change at any time. Information that has been published should therefore not be understood as implying that no change has taken place since its publication or that it is still up to date. The information in this publication does not constitute an aid for decision-making in relation to financial, legal, tax-related or other consulting matters, nor should any investment decisions or other decisions be made on the basis of this information alone. It is recommended that advice be obtained from a qualified expert. Investors should be aware that the value of investments can fall as well as rise. Positive performance in the past is therefore no guarantee of positive performance in the future. Investments in foreign currencies are also subject to fluctuations in exchange rates. We disclaim all liability for any loss or damage of any kind, whether direct, indirect or consequential, which may be incurred through the use of this publication. This publication is not intended for persons subject to legislation that prohibits its distribution or makes its distribution contingent upon an approval. Any person coming into possession of this publication shall therefore be obliged to find out about any restrictions that may apply and to comply with them. In line with internal guidelines, persons responsible for compiling this report are free to buy hold and sell the securities referred to in this report.

Impressum
Herausgeber: LGT Bank (Schweiz) AG, Glärnischstrasse 36, CH-8027 Zürich
Redaktion: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Quelle: LGT Bank (Schweiz) AG