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LGT Navigator: ECB under high pressure of expectations

September 11, 2019

With the lack of stimulus from new economic indicators and a deadlock on the trade conflict and the Brexit, investors are eagerly awaiting the ECB's interest rate decision this week.

The monetary policy of the European Central Bank (ECB) has been expansionary for years, but in view of the noticeable economic slowdown in Europe and persistently low inflation, the central bank is under pressure to step on the monetary accelerator once again. However, according to Bloomberg there seems to be no real agreement in the Governing Council on the further course of monetary policy shortly before the interest rate decision on Thursday. ECB President Mario Draghi, who will leave office at the end of October, is expected to meet internal resistance to the far-reaching monetary policy measures he has supported and to a potential relaunch of the bond purchase program. In recent weeks, a number of ECB council members had already expressed themselves increasingly negatively with regard to a new issue of the bond purchases. Critics include German Bundesbank President Jens Weidmann, Klaas Knot, Chairman of the Dutch central bank, and French central bank head Francois Villeroy de Galhau. The ECB's interest rate decision on Thursday will show whether expectations on the capital markets are too high. Analysts currently expect a combination of interest rate cuts, the resumption of net purchases of securities, the introduction of graduated interest rates for banks and a new "forward guidance" (the outlook for interest rate developments). However, investors are not only reluctant because of the upcoming central bank decisions – next week the ECB will be followed by the Fed, the Bank of England and the SNB – but also because of fears of recession following last Friday's weaker than expected US labor market report or the strongest price cuts in Chinese industry in three years against the backdrop of the ongoing trade dispute with the USA.

Apple presents new iPhones

As expected, Apple yesterday unveiled a cheaper iPhone and two other new models in the smartphone range. Apple also announced that it would offer its TV streaming service with a low subscription fee. iPhone 11 is equipped with a battery that is expected to last an hour longer. Photography will also be possible under poor lighting conditions, and video recordings will be triggered by pressing the camera button for a long time. The models are available in new colors. Apple has also lowered the price of the cheapest model by USD 50 to USD 699, while the premium model costs just under USD 1,100.

IMF succession – only one candidate

The current Managing Director of the World Bank, Bulgarian Kristalina Georgiewa (66), is expected to succeed Christine Lagarde to head the International Monetary Fund (IMF). Georgieva is apparently the only candidate who has applied for the position of IMF head. The decision is to be made formally by early October at the latest. Traditionally, a European holds a chief position at the IMF. Christine Lagarde, former head of the IMF, will take over from Mario Draghi at the head of the European Central Bank (ECB) in November.

Von der Leyen's EU Commission Cabinet

Future EU Commission President Ursula von der Leyen plans to confirm Margrethe Vestager as Competition Commissioner. In the Commission's last legislature, Danish President Vestager made a name for herself with her resolute action against American digital companies. Now she is also to dismantle barriers in the digital internal market, optimize the use of data or be responsible for cyber security. In addition, former Italian Prime Minister Paolo Gentiloni is to be appointed EU Commissioner for Economic Affairs. Irishman Phil Hogan will be EU Trade Commissioner and Socialist Frans Timmermans Climate Change Commissioner. The Commission has 27 members, 13 women and 14 men. In the coming weeks, all nominees will have to be confirmed by the relevant committees of the European Parliament.

Economic Indicators September 11

MEZ Country Indicator Last
14:30 US Producer Prices (m/m) +0.2%
14:30 US Producer Prices (y/y) +1.7%
14:30 US Core Producer Prices (y/y) +2.1%

Earnings Calendar September 12

Country Corporate Period
SZ KABA Holding Y
US Kroger Q2

 

 

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

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Herausgeber: LGT Bank (Schweiz) AG, Glärnischstrasse 36, CH-8027 Zürich
Redaktion: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Quelle: LGT Bank (Schweiz) AG
Core Personal Consumption Expenditure
MEZCountryIndicatorLast08:00DERetail Sales (y/y)-1.7%08:45FRConsumer Prices EU Harmonized (y/y)1.4%09:00ESGDP (y/y)2.4%09:55DEUnemployment Rate5.0%11:00EUGDP (y/y)1.2%11:00EUCore Consumer Prices (y/y)1.1%11:00EUUnemployment Rate7.5%11:00ITConsumer Prices EU Harmonized (y/y)0.8%12:00ITGDP (q/q)0.12%14:15USADP Employment Report102k20:00USFederal Funds Target Rate2.5%