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LGT Navigator: Earnings season moves to the center of attention

October 12, 2020

Donald Trump returned to the political stage this weekend. Meanwhile, negotiations on a second corona aid package have again stalled in the US Congress. In addition to the political events, the quarterly results of stock market heavyweights are likely to cause movement on the markets. Major US banks are are kicking off earnings season this week.

US election campaign and hick-hack for economic stimulus package sets the pace

The Asian stock markets started the new trading week unevenly. The Shanghai Composite (+2.4%) and the Hang Seng Index (+2.4%) were clearly up on Monday, while the Nikkei in Tokyo lost -0.3%. In Europe, too, the picture in pre-market trading is mixed. Analysts expect that the renewed spread of the coronavirus is likely to have a negative impact on stock market sentiment. In Spain, for example, the government has declared a state of emergency on Madrid and the UK is considering tougher protective measures. 

Major US banks present earnings

In the coming days, investors will turn their attention to Wall Street, where the reporting season is gaining momentum this week. On Tuesday, the first S&P 500 companies will present their figures for the third quarter, with the big banks JPMorgan Chase, Bank of America and Wells Fargo making a start. Analysts are cautiously optimistic: although they expect a 20% decline in earnings on an aggregated index level compared to the same period last year, they have raised their forecasts in recent weeks. Normally, the closer the quarterly results come, the lower the expectations. However, as in the previous quarter, visibility is low. Only 69 S&P 500 companies have published a profit outlook for the third quarter, which is significantly below the five-year average of 104, as calculated by data service provider Factset.

Negotiations in US Congress are at impasse

Hopes that the US Congress would finally agree on a new corona aid package before the presidential elections boosted stock markets at the end of last week. But on Sunday the negotiations stalled again. The government submitted a compromise proposal of USD 1.8 trillion to parliamentarians - this is significantly more than the amount the Republicans want to offer and less than the package presented by the Democrats. Consequently, both sides expressed dissatisfaction with the proposal. The speaker of the House of Representatives, Nancy Pelosi, especially criticized the government's lack of strategy in dealing with the pandemic. Donald Trump has made it clear that he does not take the fight against the virus seriously and this is also reflected in the government's aid package, said Pelosi. “Until these serious issues are resolved, we remain at an impasse”, she said.

Trump returns to the campaign stage

Meanwhile, the saga of Trump's corona disease continues to dominate the election campaign in the US. The second TV duel between the incumbent president and his challenger Joe Biden has now been officially cancelled after Trump neither wanted to participate in a virtual debate nor presented a negative corona test. The two opponents should have been on stage in Miami on October 15. However, the third television debate is scheduled to take place in Nashville on October 22 as planned. After not being seen in public for several days, Trump returned to the political stage on Saturday and appeared on the balcony of the White House, where he gave a speech to his supporters. On Monday there is also an election campaign event in Florida on the program. Trump's doctor has declared that the president is no longer a risk of infection for others. Whether this has been confirmed by relevant corona tests remains open, however.

Italian industrial production shows strong growth

The Italian industry produced 7.7% more goods in August than in the previous month. The manufacturing sector is thus recovering faster than expected from the slump triggered by the corona crisis in spring. Economists had expected growth of only 1.4%, after production has already increased by 7% in July. The figures are also respectable compared to the same period of the previous year: output was only 0.3% below the level of August 2019. Meanwhile, the industrial recovery in France is progressing slower. In August, production increased by 1.3% within one month. Compared with the previous months of July (+3.8%) and June (+12.7%), growth has thus once again lost momentum. 

Economic recovery in Great Britain loses momentum

The British economy is recovering less quickly than expected. In August, gross domestic product grew by 2.1% within one month – this is the smallest increase since May, when the economy returned to a growth path for the first time after the corona shock. Market observers had expected an increase of 4.6%.

 

Economic Indicators October 13

MEZ Country Indicator Last
08:00 UK Unemployment Rate (September) 4.1%
11:00 GE ZEW Expectations index (October) 77.4
11:00 GE ZEW Current Situation index (October) -66.2
11:00 EZ ZEW Expectations index (October) 73.9
14:30 US Consumer Prices (September, m/m) +0.4%
14:30 US Consumer Prices (September, y/y) +1.3%
14:30 US Core Consumer Prices (September, y/y) +1.7%

Earnings Calendar October 13

Country Corporate Period
US JPMorgan Chase Q3
US Citigroup Q3
US Johnson & Johnson Q3

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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US employment growth remains dynamic at the beginning of the year