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LGT Navigator: Chairman Powell reaffirms Fed's course and warns of risks from coronavirus

February 12, 2020

US Federal Reserve Chairman Powell reiterated the Federal Reserve's wait-and-see attitude, but also warned of the economic dangers posed by the coronavirus epidemic. Yesterday, waning concerns about the spread and impact of the coronavirus led to gains and in some cases to new records on the stock markets. In Asia, too, most equity indices rose on signs of a slowdown in new coronavirus infections.

Fed Chairman Jerome Powell

Jerome Powell, Chairman of the US Federal Reserve, still considers monetary policy to be appropriate. However, the Fed is keeping a close eye on the risks to the US and global economy arising from the coronavirus. Powell warned that the epidemic could potentially lead to distortions in China and spread to the rest of the world economy. On a positive note, the slightly reduced uncertainties regarding the trade conflict should be seen as positive, although there are still risks for the economic outlook, Powell commented during his half-yearly report to the House of Representatives in Washington. In view of the low level of interest rates and the Fed's limited room for manoeuvre, Powell emphasized the government's shared responsibility and its spending policy – an allusion to the harsh criticism of US President Trump.

The coronavirus was given the official name “COVID-19” by the WHO. In the meantime, the number of deaths in China has risen to 1,115 and the number of confirmed infections in mainland China has reached almost 45,000. The latest data from China, however, also raise hopes that the epidemic is slowing down. The Chinese province of Hubei, for example, recorded the lowest number of new infections this month, and suspected cases in China fell by more than 5,000 to about 16,000.

ECB head Lagarde stresses limited room for manoeuvre for central banks

According to Christine Lagarde, President of the European Central Bank (ECB), monetary policy cannot be the measure of all things and shoulder all the economic burdens. Like her colleague Powell in the US, Lagarde stressed before the European Parliament in Strasbourg that the central banks' room for manoeuvre was limited in the current low-interest environment. In addition, the ECB was closely monitoring possible negative side effects of its monetary policy.

Sanders secures victory in New Hampshire

Senator Bernie Sanders (78) narrowly won the second primary in the race for the US Democratic presidential candidacy. After counting almost all the votes, Sanders secured approximately 26% in the New Hampshire state vote. Pete Buttigieg (38), the winner in Iowa, was just behind with a good 24% of the votes. Sanders emphasized that as president he will work for better health care, higher taxes for the rich, stricter weapons laws and the fight against climate change. In third place came the surprisingly moderate Senator Amy Klobuchar (59) with almost 20% of the vote. Only in fourth and fifth place followed Elizabeth Warren 9% and Joe Biden 8%. Mike Bloomberg could still cause a surprise in the race for the democratic presidential candidacy. The former mayor of New York will not intervene in the race until “Super Tuesday”.

British economy at a standstill in 2019

In view of the uncertainties in the Brexit drama, the British economy stagnated last year, as current data from the statistics office ONS showed. The gross domestic product in the final quarter of 2019 was thus at the level of the previous quarter. However, at +0.5% the third quarter turned out better than previously assumed at +0.4%. Foreign trade and government investment had a supportive effect. Private consumption, on the other hand, was weaker.

 

 

Economic Indicators February 12

MEZ Country Indicator Last
10:30 UK GDP Q4 (q/q) +0.4%
10:30 UK Industrial Production (m/m) -1.2%
10:30 UK Industrial Production (y/y) -1.6%
16:00 US US Fed Powell Testamony   

Earnings Calendar February 12

Country Corporate Period
GE Daimler Y19
FR Air Liquide Q1

 

 

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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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