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LGT Navigator: Economic optimism ensures friendly stock market environment

April 19, 2021

On Wall Street, the stock rally continued unabated at the end of last week. The rally was buoyed by further encouraging US economic data, strong corporate figures, and the progress of the Covid-19 vaccination campaign. In Asia, the stock exchanges today mostly follow the positive guidance from overseas and Europe's stock markets can expect a friendly start to the week.

Economic optimism ensures friendly stock market environment

On Friday, the Dow Jones Industrial and the market-wide S&P 500 already reached further record values in the first minutes of trading. The Dow increased until the close of trading by +0.48% compared to the previous day's close to 34,200.67 points. On a weekly basis, the benchmark index notes a gain of about +1% and a solid gain of almost +12% since the beginning of the year. The S&P 500 closed +0.36% higher at 4'185.47 points on Friday. A new record high was also recorded by the technology-heavy Nasdaq 100, but then closed with a somewhat more moderate daily gain of +0.11% at 14,041.91 points. The stock market sentiment remains friendly in view of good economic data and progress in the Corona vaccinations in the United States.

In Asia, most stock indices followed the positive cues of Wall Street and at the beginning of the week, investor sentiment seems to remain optimistic given signs of global economic recovery and corporate earnings outlook. For Europe's stock markets, futures are signaling an opening above the previous week's close. In addition to the ongoing corporate reporting season, the focus this week will be the European Central Bank's (ECB) interest rate decision on Thursday.

Gold price with biggest weekly gain since the end of 2020

The gold price continues to recover and last week recorded the largest weekly gain since December. Thus, the precious metal increased in price within a week by about 2%. On Friday, the troy ounce of gold cost up to USD 1,778 and was as expensive as it had last been at the end of February. Gold is thus recovering from the setback in March: the price had fallen to USD 1,676 at that time and was as low as it had last been in the summer of 2020. This was triggered by the sharp rise in yields on long-term US government bonds, with ten-year paper yielding over 1.7% at times. Currently, ten-year bond yields are hovering just below 1.6%.

Americans' buying mood on the rise and construction activity in the US picking up

American consumers are once again more confident about the future. This can be seen from the consumer confidence index of the University of Michigan. The index rose to 86.5 points in April (+1.6), its highest level in more than a year. Market observers had expected an increase to 89 points. Progress on vaccinations and an improvement in the employment situation were responsible for the optimism. Household inflation expectations also rose, reaching their highest level in nine years.

The construction industry in the US recovered in March from the onset of winter in the previous month. This was reflected in housing starts, which increased +19.4% from February, according to the Commerce Department on Friday. Analysts had expected a plus of +13.5%. The number of building permits also rose significantly, signaling a further increase in construction activity in the coming months. The data followed up on the strong economic figures of previous days, supporting the impression that the US economy is recovering across the board.

Higher cost of living in the eurozone

Inflation in the euro area increased significantly in March. Thus, consumer prices were +1.3% higher than a year earlier, the statistics office Eurostat reported on Friday. In February, the price increase was still at +0.9%. The increase is mainly due to rising energy prices, which were +4.3% higher than twelve months earlier. Despite the increase, the inflation rate is still well below the inflation target of the European Central Bank, which is just below 2%.



Economic Indicators April 19

MEZ Country Indicator Last
01:50 Japan Exports (March, y/y)) -4.5%
06:30 Japan Industrial production (Feb, m/m) -2.1%

Earnings Calender April 19

Country Corporate Period
US Coca Cola Q1


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