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LGT Navigator: COP26 probably not the “game changer” we had hoped for

November 15, 2021

At the UN Climate Change Conference in Glasgow, the 200 participating countries were called upon to tighten the targets by the end of next year, instead of every five years as before. But it has to be acknowledged that the commitments made so far to reduce greenhouse gas emissions are far from sufficient to prevent global warming from reaching 1.5 degrees above pre-industrial temperatures. The lofty expectations were only partially met, and the summit is unlikely to be the “game changer” in the fight against climate change that was hoped for.

COP26 probably not the “game changer” we had hoped for

The participants of the World Climate Conference in Glasgow were able to agree on a final declaration, but at the last minute a clear commitment to phase out coal and end fossil fuel subsidies was watered down at the behest of India and China. At the very least, it states that the commitments countries have made so far to reduce greenhouse gas emissions are far from sufficient to prevent global warming from reaching 1.5 degrees above pre-industrial temperatures. Governments are therefore being asked to tighten these targets by the end of next year, instead of every five years as they do now. Alok Sharma, president of the COP26 summit said, “We can credibly say today that we have kept 1.5 degrees Celsius within reach. But the pulse is weak, and we will only survive if we keep our promises.” Although some progress was made at the summit, ultimately the commitments remain promises and it remains to be seen if they will ultimately be implemented. 

Economic slump in Japan even more severe than expected

Meanwhile, Japan reported that the world's third-largest economy contracted in the third quarter for the first time in two quarters. In the process, GDP weakened for the first time in two quarters and even more sharply than expected, with an annualized rate of -3% compared with the previous quarter. This was mainly due to global supply disruptions, which impacted exports and business investment.

However, the start of the week on Asia's stock markets was mostly positive, supported by good economic data from China and the positive guidance from Wall Street on Friday. Retail sales and industrial production in October, for example, showed stronger-than-expected growth, despite new restrictions to combat Covid-19 outbreaks and supply shortages.

US consumer sentiment dims again

The mood of American consumers cooled in November. The University of Michigan's consumer confidence barometer fell sharply against expectations from 71.7 points in the previous month to 66.8 points. In consensus, analysts had expected an improvement to 72.5. At the same time, consumers' inflation expectations for the next twelve months also increased.

Bank of England to raise interest rates for the first time, according to a survey

According to a recent Reuters poll, the Bank of England will be the first of the major central banks to raise its key interest rate within the next two months. In the poll, conducted Nov. 8-12, a slim majority of the 47 economists surveyed forecast a first rate tightening at the next monetary policy decision on December 16. It would be the first December rate hike since 1994. Should the Bank of England decide to wait again due to various risks, such as pandemic, supply chains or specific consequences of the Brexit, almost 100% of the economists surveyed firmly expect a rate tightening of 15 basis points in the first quarter of 2022 and a further hike of 25 basis points in the second quarter. Central bank chief Andrew Bailey said last week – when the already-anticipated first rate move was postponed again – that the Bank of England would act if expectations of higher inflation pushed up wages.

Wholesale prices in Germany show strongest rise since 1974

Inflationary pressures in Germany continue to increase. In October, wholesale prices rose by +15.2% year-on-year – the strongest increase in 47 years! The background to this is the sharp price increases for many raw materials and intermediate products. For example, prices for ores and metals had risen by around +61% and wood is 48% more expensive than a year earlier. The price trend in the wholesale sector is also having a delayed impact on consumer prices. Over the last year, consumer prices have risen by +4.5%, the highest increase since 1993.

Inflation in Spain picks up significantly

In Spain, consumer prices rose by +5.4% on an annual basis in October, the strongest increase in inflation in 29 years. According to the INE statistics office, the price increase extended across almost all product categories.

Economic Indicators November 15

MEZ Country Indicator Last period
11:00 EZ Trade Balance (October) EUR +4.8bn
14:30 US NY Fed Empire State Manufacturing Index (November) +19.8


Earnings Calender November 15

Country Company Period
NL Ahold Delhaize Investor Day
US Warner Music Group Q4
UK AstraZeneca Q3


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