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LGT Navigator: Economic worries weigh on stock markets

September 8, 2021

After the long weekend, the US stock markets gave up ground on Tuesday. The focus is now once again on the central banks. On the one hand, the Fed will publish the Beige Book today, and on the other hand the European Central Bank will communicate its interest rate decision on Thursday. Against the background of increasing indications of a cooling of the economic recovery in the third quarter and the high level of uncertainty caused by the ongoing pandemic, it seems likely that the central banks will be forced to maintain their expansionary stance for longer, which in turn could provide support for the equity markets.

Economic worries weigh on stock markets

On Wall Street, stock indices posted losses after the weekend extended by “Labor Day”. The Dow Jones Industrial closed at 35'100.00 points, a daily loss of -0.76%. The market-wide S&P 500 lost -0.34% and exited at 4'520.03 points. At the same time, the technology exchange Nasdaq achieved record values again thanks to the demand for the large tech stocks. Now, the regular economic report of the Federal Reserve, the so-called Beige Book, which is due this evening, is awaited with excitement. This will provide information on the state of the world's largest economy and will serve the Fed's committee (FOMC) as a basis for decisions on monetary policy.

On the Asian stock exchanges, the focus is also on the further action of the major central banks and the economic concerns in connection with the pandemic and the still low vaccination rates.

ZEW economic barometer signals further slowdown

The latest survey results from the Center for European Economic Research (ZEW) reinforced the impression that the economic recovery in Germany and the euro zone has cooled further. The economic expectations index for Germany fell from 40.4 points in August to 26.5 points in September, marking the fourth consecutive decline. The financial professionals surveyed by ZEW were particularly concerned about supply chain problems and the related shortage of materials, for example in the automotive industry or the construction sector. As a result of the slowdown, the financial experts also expect the current high level of inflation to decline over the next six months.

Strong spring quarter in the eurozone

The economy in the eurozone grew somewhat more strongly in the second quarter than previously expected. According to revised data from the statistics office, gross domestic product increased by +2.2% compared with the previous quarter. In a first estimate, Eurostat had still assumed +2.0%. In the previous two quarters, the euro economy had contracted by -0.3% and -0.6% respectively due to the measures taken to contain the pandemic. Looking at the four largest economies in the eurozone, Spain posted the strongest growth of +2.8%, followed by Italy (+2.7%), Germany (+1.6%) and France (+1.1%).

Japan's economic recovery in Q2 stronger than expected

Economic growth in Japan in the second quarter was slightly stronger than originally estimated, according to revised data. Gross domestic product expanded at an annualized rate of +1.9% in the period from April to June compared with the previous quarter (first +1.3%). Business investment in particular was stronger than initially thought.

 

Economic Indicators September 8

MEZ Country Indicator Last period
10:00 IT Retail Sales (July, y/y) +7.7%
20:00 US Fed Beige Book

 

Earnings Calender September 9

Country Company Period
GE Merck KGaA Capital Markets Day
USA Oracle Q1
USA Moderna Research & Development Day

 

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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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