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LGT Navigator: Concerns over cooling growth weigh on Wall Street

August 3, 2021

Disappointing economic data caused losses on the American stock markets on the first trading day in August. Industrial activity in the US and China cooled surprisingly. This also put pressure on oil prices. Meanwhile, the scarce availability of raw materials slows German industrial production.


US stock markets got off to a subdued start in August, giving up initial gains in the course of trading on Monday. Thus, strong corporate results provide good sentiment, but at the same time, the global spread of the delta variant of the corona virus fuels uncertainty. 

In the end the S&P 500 lost -0.2% (closing: 4387.16 points) and the Dow Jones lost -0.3% (closing: 34,838.16 points). The Nasdaq Composite posted a slight gain of +0.06% (closing: 14,681.07 points). Meanwhile, the reporting season is progressing: around 60% of S&P 500 companies have presented their quarterly figures so far, of which 88% have exceeded earnings expectations. This is well above the five-year average of 75%.

Oil prices also came under pressure on Monday after economic data from the US and China were disappointing at the start of the week. A barrel of the Brent crude oil cost on Monday USD 73.23 and was thus just under -3% cheaper than on Friday. The price of a barrel of WTI crude fell -3.3% to USD 71.48. Should the global economy cool down, the demand for oil could be reduced.

Asian stock exchanges post again losses on Tuesday. In Tokyo, the Nikkei loses -0.7% and the Hang Seng in Hong Kong declines -0.2%. The Shanghai Composite also sheds -0.2%. Among the biggest losers are once again technology stocks, including the papers of the Chinese streaming service Tencent, which lose more than -7%. Earlier, Chinese media close to the state referred to online gambling as opium and expressed concerns that young people spend too much time with susch games.

Industrial activity in the US weakens

Sentiment in US manufacturing took a surprising turn for the worse in July. The ISM purchasing managers' index fell -1.1 points from the previous month to 59.5, the Institute for Supply Management (ISM) reported Monday. Analysts, however, had expected an increase to 61 points. Despite the decline, the index, considered one of the most important leading indicators for the US economy, remains at a high level and signals an expansion of economic activity. Construction spending also showed a disappointing performance. Although it increased by +0.1% in June compared with the previous month, market observers had expected an increase of +0.4%. The construction industry has been recovering since the middle of last year from the setback during the first wave of the corona pandemic. Recently, however, the sector has suffered from a shortage of raw materials as well as higher material prices.

Material shortages slow down German industry

German industry is also feeling the material shortage, as reported by the Ifo Institute. 64% of the companies surveyed have complained about bottlenecks in advance deliveries for production - a record figure. This development threatens to jeopardize the upswing, according to the economists of the Munich-based institute, because the manufacturers' inventories, thanks to which the shortage can currently still be cushioned, are increasingly emptying. For example, more than 80% of car manufacturers and suppliers have reported a shortage of semiconductors and chips, which has already led to delivery delays in some cases. In addition, rising raw material prices are causing problems for producers. The shortages are the result of production cutbacks in the raw materials sector during the corona crisis. Because the recovery is progressing much faster than expected, there is now a scarcity of resources. 

Swiss industrial PMI at record high

Meanwhile, the outlook for the Swiss economy remains good. Thus, the Purchasing Managers' Index (PMI) for industry rose by 4.3 points to 71.1 in July - the barometer has never been so high since data collection began in 1995, Credit Suisse reported. The bank calculates the index together with the industry association The marked increase in production in particular contributed to the positive development. In addition, the order situation has improved, which suggests high industrial activity in the coming months. In the service sector, however, sentiment has clouded over somewhat and the service PMI fell from 64.4 in June to 60.8 points in July. Nevertheless, the index remains well above the growth threshold of 50. 



Economic Indicators August 3

09:00 CH Seco consumer confidence (July) -18
16:00 US Manufacturing orders (June) +1.7%


Earnings Calender August 3

Country Company Period
CHN Alibaba Q1
IT Generali Q2
CH Galenica Q2
CH OC Oerlikon Q2
FR Société Générale Q2


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