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LGT Navigator: ECB faces policy decision – Bank of Japan remains in wait-and-see mode

October 28, 2021

The European Central Bank's monetary policy decision is now eagerly awaited this afternoon. The focus will be on the ECB's assessment of the inflation outlook. Meanwhile, the Japanese central bank is sticking to its expansionary stance and even forecasts low inflation for years and accordingly signaled a delay in the withdrawal of its quantitative measures. While the central bank decisions will certainly affect the market sentiment, the ongoing corporate earnings season remains the driver on stock exchanges.

ECB monetary policy decision in the spotlight

The European Central Bank (ECB) will communicate its future monetary policy today at 13:45 (CET). In general, no immediate adjustment of the monetary policy strategy is expected. The focus is rather on the assessment regarding the increased inflation rates and expectations – the press conference of ECB President Christine Lagarde is scheduled for 14:30 (CET).  

Japan's central bank signals delay in QE withdrawal

The Bank of Japan this morning reaffirmed its expansionary monetary policy stance and now forecasts that inflation will remain well below the 2% target for at least two more years. The BoJ lowered its inflation forecast for the year ending March 2022 to zero percent from +0.6%. At the same time, the central bank expects economic growth in the current year to be weaker than previously anticipated.

Canada's central bank ends QE program

The central bank of Canada announced yesterday that it will end its bond-buying program. In addition, the Bank of Canada held out the prospect of an interest rate hike next year – currently the key interest rate stands at +0.25%. As a result, the Canadian dollar strengthened against all other currencies. The central bank justified the withdrawal of its quantitative measures with the fact that the inflationary pressure will be higher and more sustainable than expected.

Earnings season continues to set the pace on equity markets

On the New York Stock Exchange, the ongoing corporate reporting season continues to take center stage. Although the indices have recently reached new record highs, the momentum seems to lose steam each time. The Dow Jones Industrial was down -0.74% to 35'490.69 points by the closing bell. The broad S&P 500 closed -0.51% lower at 4'551.68 points. Meanwhile, the technology exchange Nasdaq continued its recent rally, spurred by the quarterly figures of Alphabet and Microsoft. Again today, a whole series of important quarterly reports are expected, such as in Europe from Volkswagen, Sanofi or in the US from Amazon and Apple.

German consumers prefer purchases due to threat of inflation

According to the latest survey results from the Nuremberg-based consumer research company GfK, German consumers are currently buying more because they fear further price increases. The increased propensity to buy is leading to a positive consumer climate. Thus, contrary to expectations, the indicator for November improved from +0.4 to +0.9 points (consensus -0.3). The weakened expectations regarding incomes and the general economy were not able to affect the current positive basic sentiment, GfK commented.

Economic Indicators October 28

MEZ Country Indicator Last period
05:00 JP Bank of Japan interest rate decision -0.1%
08:30 JP Bank of Japan press conference
09:00 SP Consumer Prices (October, y/y) +4.0%
10:00 IT Business Climate (October) 113.0
10:00 IT Consumer Sentiment (October)  119.6
11:00 EZ Economic Sentiment (October) 117.8
11:00 EZ Business Climate (October) +1.72
13:45 EZ ECB monetary policy announcement -0.5%
14:00 GE Consumer Prices (October) +4.1%
14:30 EZ ECB press conference
14:30 US GDP Q3 (annualized, q/q) +6.7%
14:30 US Initial Jobless Claims (weekly) 290,000
16:00 US Pending Home Sales (September, m/m) +8.1%

 

Earnings Calender October 28

Country Company Period
JP Sony H1
KOR Samsung Q3 
SZ Swisscom 9M
SZ Ems Chemie 9M Sales
SZ Clariant  Q3
GE Volkswagen Q3
GE Porsche Q3
GE Lufthansa Q3
GE Beiersdorf Q3
GE Linde Q3
FR Sanofi Q3
FR Capgemini Q3
IT UniCredit Q3
SP Repsol Q3
UK Lloyds Banking Q3
UK Shell Q3
BEL Anheuser-Busch InBev Q3
FIN Nokia Q3
DK Carlsberg Q3
USA Apple Q3
USA Amazon Q3
USA Merck & Co Q3
USA Mastercard Q3
USA Starbucks Q3
USA Caterpillar 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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