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LGT Navigator: Caution and profit-taking characterize the start of the year on capital markets

January 5, 2021

The global start of Covid-19 vaccinations and the associated hopes of overcoming the corona crisis, as well as the additional corona aid package agreed in the US, initially ensured a mostly positive start to the year on the stock exchanges and in some cases new records. However, the high level is increasingly due to profit-taking and the continuing tense pandemic situation increases the caution of the players. Today, the outcome of the race in Georgia for the majority in the US Senate, which is decisive for the presidency of Joe Biden, is expected with great excitement.

Caution and profit-taking characterize the start of the year on capital markets

Many stock markets initially started the new year with renewed gains. However, the continuing high level of uncertainty surrounding the pandemic and the uncertainty as to whether the economic recovery will continue then caused profit-taking for the most part. Thus, on the New York Stock Exchange, the Dow Jones Industrial fell after initial records at the close of trading by -1.25% to 30,223.89 points. The S&P 500 went out with a daily loss of -1.48% at 3,700.65 points. On the technology exchange Nasdaq, the Nasdaq 100 selection index listed a minus of -1.5%. The European benchmark index EuroStoxx 50 also initially made a formidable start to the year and climbed by up to almost +1.6% to its highest level since the end of February 2020, before profit-taking pushed the index to the closing level of 3,564.39 points (+0.33%). In the Far East, the stock exchanges this morning shows a mixed picture marked by increasing corona case numbers in some Asian countries.

Decisive runoff election for the US Senate in Georgia

The runoff election for two Senate seats in the state of Georgia will be crucial not only for the balance of power in the US Senate, but also for the upcoming term of Democratic President Joe Biden. In the southern state, Democrats Jon Ossoff and Raphael Warnock could topple the Republicans' previous majority in the Senate with a victory over their Republican rivals David Perdue and Kelly Loeffler, which would give President-elect Biden a massively larger margin of victory. Polling stations open at 07:00 local time (13:00 CET) and close at 19:00 (01:00 CET Wednesday). However, it is unclear when definitive results will be available.

Industrial sector in the US and Europe picked up momentum at the end of 2020

According to the latest survey results from London-based market research firm IHS Markit, activity in the US industrial sector strengthened in December. The Purchasing Managers' Index, for example, rose from 56.7 points in November to 57.1. Above 50 points, the economic barometer signals growth. IHS Markit Chief Economist Chris Williamson commented that US manufacturing production and backlogs continue to grow, but at a slower pace due to rising corona infection numbers and related constraints. Today will show whether IHS Markit's survey results are in-line with those of the ISM, the industry association of US purchasing managers. The ISM industrial PMI, which is highly watched because of its high correlation to growth in the overall economy, will be released at 16:00 (CET) today.

The purchasing managers' index from market research firm IHS Markit climbed 1.4 points to 55.2 in December from the previous month, signaling stronger growth in the sector. According to Markit chief economist Chris Williamson, the eurozone's industrial sector ended 2020 with the highest rates of output growth in three years. Currently, he said, the industrial sector is the mainstay of the euro economy, while the services sector has been hit much harder by the recent pandemic restrictions.



Economic Indicators January 5

MEZ Country Indicator Last
09:30 SZ Consumer Prices (December, y/y) -0.7%
09:55 GE Unemployment Rate (December)  6.1%
16:00 US ISM Manufacturing (December)  57.5

Earnings Calendar January 15

Country Corporate Period
US JPMorgan Chase Q4
US Citigroup  Q4
US Goldman Sachs Q4
US Alcoa


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