Skip navigation Scroll to top
Scroll to top

LGT Navigator: Compromise to get US corona package on track

August 20, 2020

A compromise seems to be emerging in Washington in the dispute over the further corona aid package. A scaled-down solution in the amount of “only“ about half a trillion US dollars is now being discussed. While the New York Stock Exchange has been making headlines in the last few days with records, the reluctance of many European stock exchanges is outweighed by the worrying increase in new Covid-19 infections in many European countries. The Fed's minutes of its meeting primarily emphasized the risks and uncertainties for the US economic outlook and contributed to the cautious mood among investors.

Compromise to get US corona aid package on track

On Capitol Hill, Democrats and Republicans seem to have come somewhat closer in their dispute over the scope and design of the new corona bailout package. While the Democrats had originally tabled a stimulus package worth more than USD 2 trillion, the compromise is said to be “only“ about USD 500bn. If the Democrats have their way, the package should above all also secure the financing of the ailing US postal service ­ so that a postal vote in corona times is guaranteed. But the program should also continue to include loans for small and medium-sized enterprises to safeguard jobs.

Fed stresses risks and uncertainties

In the minutes of the Monetary Policy Committee's (FOMC) last interest rate decision of 28th to 29th July, published yesterday evening, the US Federal Reserve drew particular attention to the existing risks and uncertainties. The economic recovery in the US was dependent on the further course of the corona crisis. The pandemic continues to pose a considerable risk to the economic outlook. Without containment of the pandemic, a full economic recovery would be difficult, said Federal Reserve Chairman Jerome Powell. The Fed therefore remains prepared to use all available instruments if necessary.

Investors, however, do not seem satisfied with the foreseeable compromise on Capitol Hill. On the New York Stock Exchange, the indices fell in the middle of the week, following some record highs that had been reached in the last few days. The Dow Jones Industrial closed -0.31% lower at 27 692.88 points and the S&P 500 fell -0.44% to 3 374.85 points. However, Wall Street was also able to report another record yesterday as Apple shares reached a market value of over USD 2 trillion for the first time! Asian stocks mostly followed the negative data from the US, especially after the Federal Reserve's cautious economic assessment. In Tokyo, the Nikkei Index, which comprises 225 stocks, lost around -1% and in Hong Kong the Hang Seng Index was down around -2%.

Trade talks between US and China temporarily suspended

US President Trump said briefly and succinctly that he did not want to talk to China's leadership about trade relations at this time. Originally, the negotiating delegations of the two countries should have assessed the Phase-1 trade agreement agreed upon at the beginning of the year last weekend and discussed how to proceed. For the time being, there is also no new date for the top-level trade talks, the White House said.

Minimal inflation in the eurozone

The cost of living in the euro-area continued to rise only slightly in July. Over the year as a whole, the inflation rate was +0.4% after +0.3% in June. According to Eurostat, consumers had to pay more, especially for food (+3.1%), while a decline in energy prices (-8.4%) kept inflation in check. In Germany, consumer prices in July remained unchanged compared with the same period of the previous year. In France and Italy, prices rose by +0.9% and +0.8%, respectively. In Greece and Spain, however, consumer prices fell sharply by -2.1% and -0.7%, respectively over the year.

Higher inflation in the UK

In the United Kingdom, the annual rate of consumer price inflation in July reached its highest level since March of this year at +1.0%. However, the inflation rate is still well below the Bank of England's target of two percent.



Economic Indicators August 20

MEZ Country Indicator Last
08:00 SZ Exporte (July, m/m) +7.9%
08:00 SZ Importe (July, y/y) +5.5%
14:30 US Philly Fed Manufacturing Indicator (August) +24.1
16:00 US Leading Indicator (July) +2.0%

Earnings Calendar August 21

Country Corporate Period
US Deere Q3


LGT helps you make informed investment decisions

All about global economic and market trends at a glance

Subscribe to LGT's research newsletters

Follow us on TwitterFacebook or LinkedIn, where we inform you about latest market developments and LGT News. Further informationen is available on: LGT Social Media.

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