Skip navigation Scroll to top
Scroll to top

LGT Navigator: Between economic optimism and interest rate concerns

May 6, 2021

Investors continue to be caught between optimism about an emerging economic recovery and concerns about inflation and the associated rise in interest rates. The statements made by US Treasury Secretary Yellen regarding interest-rate developments caused a short-term stir. However, the former Fed chairwoman put her comments into perspective, which helped to calm the situation. In addition, tech stocks were in demand again after the previous day's wave of selling, while pharmaceutical stocks came under pressure after the US government announced its intention to support a suspension of intellectual property rights for Covid-19 vaccines. The focus today is particularly on the monetary policy direction decision of the British central bank.

Today's focus is on the monetary policy direction decision of the Bank of England
Bank of England, London

On Wall Street, the mood stabilized yesterday after the wave of selling in technology stocks the previous day. On the Nasdaq technology exchange, the indices closed again in the red but relatively moderate: the Nasdaq Composite ended Wednesday's trading -0.37% lower at 13'582.43 points. The market-wide S&P 500 remained almost unchanged from the previous day at 4'167.59 points (+0.07%), while the Dow Jones Industrial gained +0.29% to 34'230.34 and traded not far from recent record highs. The announcement of the US government to support a suspension of intellectual property rights for corona vaccines caused a short-term sell-off in pharmaceutical stocks.

In Asia, there was no consistent trend after holidays in Japan, South Korea, and China. In Tokyo, however, the Nikkei 225 index rose strongly by around +1.6%. For the European stock markets, the futures signal a slightly positive start to trading. In the center today is also the interest rate decision of the Bank of England at 13:00.

Yellen does not want statements to be understood as an interest rate forecast

The US Treasury Secretary Janet Yellen felt compelled to qualify her statements regarding the inflation trend in the US and consequently rising interest rates. Yellen told the Wall Street Journal that she had not intended to make an interest rate forecast or recommendation. Earlier, the Treasury secretary had said in an interview that to prevent the US economy from overheating, interest rates could rise “modestly.” In the financial markets, Yellen's statement initially caused a stir and fueled speculation about an imminent change of course by the Fed considering rising inflation expectations. The former head of the Federal Reserve also made it clear that interest rate decisions are the sole responsibility of the Federal Reserve and not the Treasury Department.

ADP reports strong job growth – positive sign for labor market report

In the US private sector, job growth increased strongly in April, according to the monthly survey of the labor market service provider ADP (Automatic Data Processing). At 742'000 new jobs created, the increase fell short of the consensus estimate of 800'000 jobs, but it was the strongest job growth since September 2020, with a total of about 1.3 million new jobs created over the past two months.

US private sector on solid growth path

In the service sector in the US, sentiment improved further in April and business activity accelerated. This was indicated by the IHS Markit Purchasing Managers' Index, which rose sharply from 60.4 points in March to 64.7. Analysts had expected 63.3. For the US private sector, the PMI of the London-based market research institute also signaled a significant strengthening of the growth trend. The composite indicator (PMI Composite) climbed to 63.5 in April from 59.7 points a month earlier. According to IHS Markit Chief Economist Chris Williamson, the Fed's continued accommodative monetary policy, massive stimulus packages, a brightening labor market and the successful vaccination campaign are all contributing to an improved business climate.

Purchasing managers' surveys confirm hope for further economic recovery in the eurozone

Sentiment among service and industrial companies in the eurozone surveyed by IHS Markit was more confident about further business developments in April. The Purchasing Managers' Index (PMI Composite) for the private sector improved from 53.2 to 53.8 points. As is generally known, the indicator signals a growth trend above 50 points. According to IHS Markit chief economist Chris Williamson, sentiment has brightened both in industry and among service providers, although this varies greatly from region to region.

Producer prices in the euro area up significantly

In the euro countries, prices at company level rose sharply in March. On an annual basis, producer prices increased by +4.3%, the highest rate of increase observed since the end of 2018. In the previous month, producer price inflation had been +1.5%. In addition to supply chain issues, energy prices were primarily responsible for the price increase. Energy prices were up in March by around +10% year-on-year because of the collapse in oil prices in the first pandemic wave in the spring of 2020. However, intermediate goods, which had increased in price by +4.4% on average, also drove up prices. The rise in producer prices is likely to be reflected in consumer prices with a time lag.



Economic Indicators May 6

MEZ Country Indicator Last
08:00 GE Industry Orders (March, y/y) +1.2%
10:00 EZ ECB Monthly Bulletin
10:30 UK IHS Markit PMI Composite (April) 60.0
11:00 EZ Retail Sales (March, y/y) -2.9%
13:00 UK Bank of England Monetary Policy Decision +0.1%
14:30 US Initial Jobless Claims (weekly) 553,000
14:30 US Productivity ex-Agrar Q1 (q/q) -4.2%

Earnings Calender Mai 6

Country Corporate Period
GE Fresenius Q1 
GE Volkswagen Q1
GE Henkel Q1
GE Continental  Q1
GE Linde Q1
FR Société Générale Q1
FR Air France Q1
IT UniCredit Q1
IT Enel Q1
LUX ArcelorMittal Q1
UK Next Q1
US Moderna Q1
US Kellogg


LGT helps you make informed investment decisions

All about global economic and market trends at a glance

Subscribe to LGT's research newsletters

You can also follow us on Facebook or LinkedIn – or visit MAG/NET and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

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

US employment growth remains dynamic at the beginning of the year