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LGT Navigator: Cautious optimism in a persistently fragile market environment

November 19, 2021

Positive economic data from the US provided positive impetus on Wall Street. Technology stocks were particularly in demand. Standard stocks, on the other hand, suffered from some disappointing corporate results. Overall, stock market sentiment remains cautiously optimistic, but was dampened by uncertainties regarding inflation and interest rate developments as well as concerns that renewed pandemic restrictions could have an even greater impact on the fragile economic recovery.

Cautious optimism in a persistently fragile market environment

American technology stocks were high on Thursday against the backdrop of a strong quarterly result from the graphics processor specialist Nvidia and provided a solid daily gain on the Nasdaq technology exchange of about +1%. The Dow Jones Industrial and the S&P 500, on the other hand, suffered from a slump in the price of network equipment supplier Cisco and the Chinese e-commerce giant Alibaba, which is also listed on the New York Stock Exchange. Cisco disappointed with a subdued business outlook due to supply chain problems and a lack of computer chips. The stock plunged more than -8%. Alibaba shares fell nearly -12% at times after the company's quarterly results missed expectations and lowered its revenue forecast for the current fiscal year. As a result, the Dow closed -0.17% lower at 35'870.95 points. The market-wide S&P 500 in the end closed +0.34% higher at 4'704.54 points.

In Asia, the stock indices showed no consistent trend at the end of the week. News that Japan will announce today a new economic support program in the amount of almost USD 500 billion to cushion the consequences of the corona crisis were in the spotlight.

Positive news in the fight against the corona pandemic

The US government is buying ten million doses of the not-yet-approved Covid-19 drug “Paxlovid” from the pharmaceutical company Pfizer for around USD 5.3 billion. Following emergency approval by the FDA, deliveries are to begin this year. According to US President Joe Biden, the drug will be easily available to Americans and free of charge.

Leading indicators signal improved economic outlook for US economy

Leading indicators compiled by The Conference Board, a New York-based economic research firm, improved more than expected in October. The resulting “Leading Indicator” rose by +0.9% percent month-on-month (consensus +0.8%). The composite index is made up of ten economic figures known as leading indicators, such as initial jobless claims, new orders in industry or consumer confidence, and is intended to provide an indication of the development of the overall economy over a period of around six months.

US initial jobless claims approach pre-pandemic levels

The number of Americans filing for federal unemployment benefits for the first time last week fell back almost to pre-pandemic levels. This appears to continue the recovery in the labor market, although labor shortages remain an obstacle to faster job growth. Initial claims fell by 1'000 to a seasonally adjusted 268'000 in the week ended November 13, the lowest level since the pandemic began in the United States more than 20 months ago.

Philly Fed index sends positive signal for US industry

According to the latest survey by the Federal Reserve of Philadelphia, business confidence in the US East Coast region improved more than expected in November. The so-called Philly Fed indicator for regional industry increased by 15.2 to +39.0 points. Analysts had on average expected only a moderate increase to +24.0 points. From an index value of zero points, this indicator signals an increase in economic activity.

Turkish central bank lowers key interest rate despite continuing inflationary pressure

Despite an inflation rate of almost 20%, Turkey's central bank gave in to political pressure and cut its key interest rate again, for the third time in a row, this time by 100 basis points to now 15%. President Recep Tayyip Erdogan has already fired three central bank heads with whose monetary policies he disagreed. The current central bank president, Sahap Kavcioglu, has only been in office since March 2021. As a result of the interest rate decision, the Turkish lira slumped to new record lows against the US dollar and the euro.

Economic Indicators November 19

MEZ Country Indicator Last period
08:00 UK Retail Sales (October, m/m) -0.6%
08:00 GE Producer Prices (October, y/y) +14.2%
09:30 EZ ECB President Lagarde 


Earnings Calender November 19

Country Company Period
UK Kingfisher Q3 Sales


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Source: LGT Bank (Switzerland) Ltd.

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