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LGT Navigator: ECB under pressure to act

April 14, 2022

US stock markets recovered on Wednesday from the losses of the previous days after quarterly figures of numerous companies were better than expected. However, the major bank JPMorgan Chase caused disappointment. Today, investors look to Frankfurt, where the European Central Bank will decide on the further course of monetary policy. In view of high inflation, pressure is mounting on the ECB to raise key interest rates.


On Wall Street, stocks posted gains on Wednesday as earnings season kicked off. The S&P 500 climbed +1.1% and the Dow Jones gained +1%. The Nasdaq Composite advanced even +2%. Most quarterly results were received friendly, including the figures of Delta Air Lines (+6.2%). In contrast, the result of the US bank JPMorgan Chase caused disappointment. The shares then lost -3.2% and was the bottom of the Dow. Today, the quarterly figures of other major US banks are on the agenda, including Goldman Sachs and Citigroup.

In Asia, stock exchanges also post gains on Thursday. In Tokyo, the Nikkei is up more than +1%. In Hong Kong, the Hang Seng gains +0.4% and the Shanghai Composite advances +1.2%.

Waiting for the ECB

Today's meeting of the European Central Bank (ECB) will be the key event to watch. The ECB will announce its interest rate decision at 1:45 p.m. before ECB President Christine Lagarde appears before the press at 2:30 p.m. Investors expect further details on a possible first interest rate step. Minutes from the last meeting had shown that some members of the ECB's governing council were pushing for a rate hike in light of high inflation. So far, however, the central bank has not set a time frame. In addition, the ECB is still pumping liquidity into financial markets through its bond-buying program, while the Federal Reserve and the Bank of England have stopped buying securities. In March, the inflation rate in the currency area rose to a record level of +7.5%. Having consistently undershot its 2% inflation target over the past decade, the ECB now faces the opposite problem.

JPMorgans's profit shrinks

The profit of the largest American bank JPMorgan Chase shrank by more than -40% year-on-year in the first quarter of 2022. This resulted in earnings of USD 2.63 per share, which was below market expectations of USD 2.72. Revenue also fell, but by slightly less than forecast. Among other factors, earnings were hurt by USD 1.5 billion in provisions JPM set aside as reserves for potential defaults. This is more than double of what analysts had estimated. In addition, the bank recorded losses of more than USD 500 million in connection with write-downs resulting from the Russian attack on Ukraine. CEO Jamie Dimon was cautious about the future, saying high inflation, strained supply chains and the war in Ukraine would create major challenges. Meanwhile, the bank plans to buy back its own shares for USD 30 billion.

Inflation in the UK remains high

Consumer prices in the UK rose +7.0% year-on-year in March, the Office for National Statistics (ONS) said Wednesday. This is the highest price growth since records began in 1997. Analysts had forecast an inflation rate of +6.7%. On a month-on-month basis, the prices increased by +1.1%. Inflation is making itself felt in numerous areas of life: in addition to energy, prices for hotels, furniture, clothing and used cars have also risen. The annual inflation rate is thus well above the Bank of England's target of 2%. It has therefore already increased rates several times to curb inflation. 


Economic Indicators April 14

MEZ Country Indicator Last period
08:30 CH Producer price index (March, m/m) +0.4%
13:45 EZ ECB interest rate decision
14:30 US Retail sales (March, m/m) +0.3%
16:00 US Consumer confidence (April) 59.4


Earnings Calender April 14

Country Company Period
US Citigroup Q1 2022
US Goldman Sachs Q1 2022
US Morgan Stanley Q1 2022
US Wells Fargo Q1 2022


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