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LGT Navigator: Economic data and geopolitics slow down stock markets

August 17, 2021

With disappointing economic data from China and the US clouding the outlook for a global economic recovery and the chaotic situation in Afghanistan fueling geopolitical uncertainties, Europe's stock markets started the new trading week with losses. Meanwhile, stock indices on Wall Street managed to hold close to their record levels. Today, new economic data, e.g. US retail sales, and Fed Chairman Powell could move the markets. 

Economic data and geopolitics slow down stock markets

US stock indices again reached record values at the start of the week, but were slowed by further weak economic data and not least by geopolitical uncertainties in connection with the takeover of the Taliban, respectively the disastrous departure of the West in Afghanistan. The Dow Jones Industrial closed +0.31% higher at 35'625.40 points and the S&P 500 gained +0.26% to 4'479.71 points. On the Nasdaq, the indices remained virtually unchanged from Friday.

On Europe's stock exchanges, most indices suffered losses at the beginning of the week. The EuroStoxx 50 fell by -0.64% to 4'202.44 points, after the European benchmark index had gained ten trading days in a row and only last week cracked the mark of 4'200 points for the first time since 2008.

In Asia, equity markets this morning continued their trend following a weak start to the week and showed mostly losses. While the Tokyo Stock Exchange fell only slightly, the Hang Seng in Hong Kong lost about -1.5%, and the Shanghai Composite declined about -1.3%. 

Today, in addition to the latest data on retail sales, and thus on consumer sentiment in the US, investors are eagerly awaiting a statement from Fed Chairman Jerome Powell, looking for indications of the future direction of the Federal Reserve. Eric Rosengren, President of the Boston Fed, said yesterday that with another strong labor market report or strong employment growth, the requirements of the Federal Reserve could be met to begin reducing its monthly securities purchases.

New York industrial indicator signals slowdown

The New York Fed's so-called Empire State index is always the first in a series of regional industrial indicators that provide an indication of the health of the US industrial sector. In August, business activity in the New York metropolitan area deteriorated surprisingly sharply. Thus, the index fell from +43.0 points in July to +18.3 points. Analysts had expected a smaller decline to +29.0. In each case, a reading above zero signals an expansion in the sector over a period of around six months, while a reading below this indicates a contraction. The sharpest decline was seen in new orders among surveyed companies.

World's hottest July 2021 since measurements began more than 140 years ago

Climate measurements from the US National Oceanic and Atmospheric Administration (NOAA) do not bode well. Globally, this year's July was the warmest since measurements began in 1880. While the month of July in 2016, 2019 and 2020 were already record holders, this year's July surpassed them by 0.01 degrees Celsius. While the average temperature in the 20th century was 15.8 degrees Celsius over land and sea, this year's average was 16.73 degrees Celsius. At the same time, July 2021 is among the ten warmest Julys ever recorded in Asia, North and South America, and Africa. Meanwhile, it is also believed that 2021 could become one of the ten warmest years ever recorded. The consequences of continued global warming are well known. If emissions are not drastically reduced, extreme weather events, according to the latest report by the Intergovernmental Panel on Climate Change, will become even more frequent and severe in the future.


Economic Indicators August 17

MEZ Country Indicator Last period
08:00 UK Unemployment Rate 4.8%
11:00 EZ GDP Q2 (q/q) +2.0%
14:30 US Retail Sales (July, m/m) +0.6%
15:15 US Industrial Production (July, m/m) +0.4%
16:00 US NAHB housing market index (August)  +80.0
19:30 US Fed Governor Powell speech


Earnings Calender August 17

Country Company Period
SZ Swiss Life H1
US Walmart Q2
US Home Depot Q2
US Agilent Technologies Q2


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