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LGT Navigator: Economic indicators dampen stock market sentiment

September 2, 2021

Weaker-than-anticipated figures from the US labor market and mixed survey results from the American and European industry against the backdrop of supply chain bottlenecks make for a somewhat gloomier outlook for the global economy, but also strengthen hopes for longer-lasting support from central banks. Against this backdrop, the Nasdaq technology exchange once again reached record levels.

Economic indicators dampen stock market sentiment

Supported by demand for US technology stocks sensitive to the economy, the Nasdaq Composite gained +0.33% on Wednesday. Meanwhile, the broad-based S&P 500 was virtually unchanged from the previous day, exiting trading at 4'524.09 points (+0.03%). The Dow Jones Industrial, however, fell by -0.14% to 35'312.53 points. On the Asian stock markets this morning, no consistent trend was discernible. In Tokyo, the Nikkei 225 index traded around +0.2% higher and in China, the Shanghai Composite +0.5%. For Europe's stock exchanges, the futures markets signal moderate losses.

Weaker than expected job growth in the US private sector

In the United States, private sector employment grew at a slower pace in August than analysts had forecast. Compared to the previous month, +374'000 new jobs were added, which was stronger than July's +326'000, but much weaker than the consensus expectation of 625'000 new jobs. The majority of new jobs were created in the service sector in August, according to data from ADP, a private US labor market services provider. ADP's report is considered an indication of the official US labor market report due Friday, which is always of great importance to the central bank and financial markets.

Industrial sector worldwide in shadow of supply chain problems

Activity in the US industrial sector accelerated again in August. The Institute for Supply Management's (ISM) Purchasing Managers' Index (PMI) rose to 59.9 points from 59.5 points in July. Analysts had on average expected a decline to 58.6 points. The better-than-expected result was driven by a significant increase in new orders. In contrast to the ISM survey, the PMI of the London-based market research institute IHS Markit showed a decline in activity in US industry. The indicator slipped to 61.1 in August from 63.4 points in July. The focus is on ongoing problems in global supply chains.

In the euro area, industrial sentiment also deteriorated for a second consecutive month in August, according to the latest survey results from IHS Markit. The Purchasing Managers' Index fell by 1.4 points to 61.4. Despite the decline, the PMI remains at a high level. According to Markit chief economist Chris Williamson, on the one hand suppliers were not able to increase their production and on the other hand there was a lack of transport capacities. In a regional comparison, it was observed that the mood in industry in Germany and France clouded over, while in Italy and Spain there was a slight improvement.

ECB must not underestimate inflation risks according to Bundesbank head

The loose monetary policy of the European Central Bank (ECB) remains justified because of the continued weak inflation outlook, according to Bundesbank chief and ECB Governing Council member Jens Weidmann. However, inflation risks should not be underestimated and the ECB should therefore not lock in its expansionary monetary policy for too long, according to Weidmann. The ECB will decide on the further course of action next week, on Thursday, September 9, and will also publish new inflation forecasts.

 

Economic Indicators September 2

MEZ Country Indicator Last period
08:30 SZ Consumer Prices (August, y/y) +0.7%
09:00 SZ GDP Q2 (q/q) -0.5%
11:00 EZ Producer Prices (July, y/y) +10.2%
14:30 US Initial Jobless Claims (weekly) +353,000
14:30 US Trade Balance (July) USD -75.7bn
16:00 US Durable Goods Orders (July, m/m) +1.5%

 

Earnings Calender September 2

Country Company Period
US Broadcom Q3
US Ciena 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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