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LGT Navigator: Dimmed visibility

December 9, 2021

The short-term optimism on stock markets gave way to a somewhat more realistic risk assessment in the middle of the week. The further development of the pandemic remains a high factor of uncertainty, and there is still little scientific evidence of the effects of the Omicron virus variant. Market visibility therefore remains limited, not only for investors but also for central banks. In Asia, moreover, the Chinese real estate group Evergrande continues to cause nervousness. In the run-up to the US consumer price data due at the end of the week, capital markets will also once again increasingly focus on inflation trends.

Dimmed visibility

On US stock markets, the recovery rally lost significant momentum on Wednesday and the stock indices closed little changed from the previous day. The Dow Jones Industrial turned in the last minutes of trading into positive territory and ended trading  +0.1% at 35'754.75 points. The S&P 500 gained +0.31% to 4'701.21 points and on the Nasdaq technology exchange, the indices posted daily gains of around +0.4%. BioNTech and Pfizer provided a positive accent, announcing that a three-dose vaccination with their Covid-19 vaccine would neutralize the Omicron variant in a laboratory test. If there is need, an Omicron-based vaccine could be available in March 2022, they said.

In Asia, the picture was mixed on Thursday. An uncertainty factor remains Evergrande and the concern that in the wake more Chinese real estate companies could get into trouble.

Bank of England likely to wait longer in light of Omicron uncertainties

According to a recent Reuters poll, the British central bank will wait until early next year before raising key interest rates for the first time – later than previously expected. The background is the uncertain pandemic development with the Omicron variant and the potential economic impact. The Bank of England will decide on a possible interest rate step on December 16.

Canada's central bank leaves interest rate unchanged

As expected, the Bank of Canada left its key interest rate at +0.25% and maintained its forecast that the conditions for a first rate hike should be in place in the spring of next year. The central bank referred to the high inflation, but at the same time warned of the increased uncertainty caused by the virus variant Omicron.

Phase of “temporarily” high inflation in the euro area could last longer

ECB Vice President Luis de Guindos assumes that it could take longer for inflation in the eurozone to return to the target level. He said this poses a challenge for the ECB and complicates the monetary policy decision on December 16. The ECB vice president did reiterate the central bank's “official” stance, which assumes that inflationary pressures are temporary, and that inflation will settle back to the two percent target level. However, concerns seem to be growing at the top of the ECB as well. In November, the inflation rate in the eurozone reached a record high of +4.9%. According to de Guindos, the ECB must now keep a particularly watchful eye on developments in wages and wage negotiations.

Economic Indicators December 9

MEZ Country Indicator Last period
08:00 GE Exports (October, m/m) -0.7%
08:00 GE Imports (October, m/m) +0.1%
09:00 SZ SECO Economic Forecasts
14:30 US Initial Jobless Claims (weekly) 222,000


Earnings Calender December 10

Country Company Period
GE Daimler Truck Initial Listing
UK Anglo American Investor Update


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