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LGT Navigator: The focus of attention turns towards central banks

June 13, 2019

While investors are taking the opportunity to take profits after the recent rally on the stock markets, the focus is now on the upcoming central bank decisions – today by the Swiss National Bank (SNB).

Navigator_SNB

Besides the trade dispute, the focus on financial markets is now primarily on the central banks. Before the Federal Reserve (Fed) announces its eagerly awaited interest rate decision next Wednesday, the focus today will be on the Swiss National Bank's monetary policy announcement against the backdrop of ongoing uncertainties. On the occasion of its quarterly monetary policy assessment, the SNB will announce its interest rate decision today at 09:30am (CET). An adjustment of key rates is currently not expected, but it will be interesting to see how the SNB intends to position itself with regard to the Fed's and subsequently the ECB's turnaround in monetary policy. The SNB may also lower its inflation forecast. In addition, the continuing uncertainties, above all a potential expansion of the trade war, entail a considerable appreciation risk for the Swiss franc. At the same time, the SNB will also publish its Financial Stability Report.

Meanwhile, Wall Street continued to consolidate after indices in Europe had already lost their previous gains. Investors were also cautious on Asia's stock markets, with most indices trading in the red. Investor sentiment continues to be weighed down mainly by the swelling trade conflict accompanied by erratic Twitter messages from US President Trump. Meanwhile, the head of the International Monetary Fund (IMF), Christine Lagarde, warned of a further escalation of the international trade conflict and called for constructive dialogue. The current situation is a challenge for all economies. According to the IMF, the trade conflict is likely to have a significant impact on global economic growth.

Weaker US inflation provides Fed leeway

Inflation in the US weakened more than expected in May. Consumer prices rose by +1.8% compared to the same month last year. In the previous month the rate had been +2.0%. Analysts had expected a slowdown, albeit only to an average of +1.9%, while the cost of living rose by +0.1% month-on-month. Core inflation, which excludes energy and food prices, was +2.0% year-on-year, little less than forecast. The US Fed is aiming for an inflation rate of two percent. Although the currency watchdogs are geared to the alternative price index, the central bank's target is considered to have been met to a certain extent. The current somewhat weaker inflation would not put any obstacles in the way of the Fed loosening its monetary policy, which is now firmly expected on the markets. The Fed's Monetary Policy Committee (FOMC) will meet next week, although no change in interest rates is expected. However, markets are currently expecting a total of three rate cuts this year.

Brussels increases pressure on Rome

Before today's meeting of the Eurogroup, the EU Commission called on the Italian government to take immediate measures to restructure its public finances. It's now clearly Rome's turn, said EU Finance Commissioner Pierre Moscovici. Last week, the EU executive recommended legal proceedings against Italy for its excessive deficit and has now received the backing of the EU member states. Italy's national debt currently accounts for around 130 percent of its economic output. According to the EU Stability and Growth Pact, the limit is only 60 percent. Moscovici warned that no one should doubt that the EU will apply these rules even if the criteria are not met. Italy's Prime Minister Giuseppe Conte resisted the criticism and demanded that his government first be given the opportunity to explain its plans.



Economic Indicators June 13

MEZ Country Indicator Last
07:45 SZ SECO Economic forecasts  
08:00 GE Consumer Prices (y/y) +1.3%
09:00 SZ KOF Economic forecasts  
09:30 SZ SNB monetary policy decision -0.75%
11:00 EZ Industrialproduction (y/y) -0.6%
14:30 US Import prices (y/y) -0.2%
14:30 US Initial jobless claims 218,000

Earnings Calendar June 19

Country Corporate Period
US Oracle Q4

 

 

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Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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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