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LGT Navigator: Concerns about global supply chains weigh on outlook for world economy

November 29, 2022

Fears of even stricter measures by China against the corona pandemic and protests against the zero-Covid policy are again causing increased uncertainties regarding the still fragile global supply chains. This is not only clouding the outlook for the global economy, but also sentiment on capital markets.  Moving into focus this week are now new data on the US labor market. In addition to the report from ADP on Wednesday, financial markets are eagerly awaiting the official end of week. This is also likely to be of great importance for the further course of US interest rate policy. In this regard, the regular economic report of the Fed, the so-called Beige Book, on Wednesday evening could also provide clues.

Concerns about global supply chains weigh on outlook for world economy

On Wall Street, the Dow Jones Industrial closed at the beginning of the week -1.45% lower at 33'849.46 points and the market-wide S&P 500 lost -1.54%; closing at 3'963.94 points. On the Nasdaq, the indices lost around -1.5% on Monday. The mood was dampened mainly by events in China. The share of the iPhone manufacturer Apple fell by about -2.6% on concerns about production stoppages and disruptions in the supply chains. In the bond market, the yield of the ten-year US government bonds is currently quoted at 3.7%. The US dollar caught up somewhat against the euro and traded this morning at 1.0380. Earlier, the European single currency had risen to almost 1.05 against the greenback to the highest level since the end of June.

In the Asia-Pacific region, most stock indices rose on Tuesday. The backdrop was a reported drop in Covid-19 cases in China. Hong Kong's Hang Seng Index gained around +4% and the Hang Seng Tech Index was up as much as around +6%. In mainland China, the Shanghai Composite rose +2.1%. In Tokyo, however, the Nikkei 225 index closed slightly lower than the previous day by almost -0.5%.

ECB top signals continued inflation fight mode

Christine Lagarde, President of the European Central Bank (ECB), stressed to the European Parliament's Monetary Affairs Committee that the central bank is determined to continue fighting inflation: “We are determined to take the necessary measures to do so”. Dutch ECB Governing Council member Klaas Knot also advocates a continued decisive fight against inflation. A continued restrictive stance is necessary, he said, given ongoing inflation risks and the time needed to restore price stability. As in the US, there is ongoing debate at the top of the ECB as to whether the recent high pace of tightening should be maintained or reduced. The ECB's last interest rate decision this year is set for December 15.

Supply bottlenecks cost German industry more than 60 billion euros

According to a recent study by the Macroeconomic Policy Institute (IMK), Germany's industry recorded production losses of almost EUR 64 billion in the period from early 2021 to mid-2022. The supply bottlenecks hit the auto industry particularly hard. For example, value added was down by around 30 billion euros due to the shortage of intermediate products. According to the IMK, the impact on the economy has been massive. For example, without the supply chain disruptions, German GDP would have been 1.2% higher at the end of 2021 and 1.5% higher in mid-2022. In the future, it would be important to focus on a strategy based on greater resilience, more inventory reserves, diversification and sustainability of supply chains.


Economic Indicators November 29

CET Country Indicator Last period
09:00 SZ GDP Q3 (q/q, revision) +0.3%
09:00 ES Consumer Prices (November, y/y) +7.3%
11:00 IT Producer Prices (October, y/y) +41.8%
11:00 EZ Economic Sentiment (November) 92.5
11:00 EZ Business Climate (November) +0.76
11:00 EZ Consumer Confidence (November) -23.9
15:00 GE Consumer Prices (November, y/y) +11.6%
15:00 US S&P/CaseShiller house prices 20 biggest cities (Sept., y/y) +13.1%
16:00 US Bank of England Governor Bailey speaks
16:00 US Consumer Confidence (November)  102.5

Earnings Calender November 29

Country Company Period
SZ Nestle (investor seminar)
UK Easyjet  annual
FR Axa (investor day)


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