US stock exchanges had a mixed start to the new week. The S&P 500 gained +0.1% and the Dow Jones advanced +0.3%. Technology stocks, on the other hand, are under pressure two days before the interest rate decision of the Federal Reserve and the Nasdaq Composite lost -0.4%. The expected tightening of US monetary policy on Wednesday is likely to particularly hurt the rate-sensitive tech stocks. Today, Google parent Alphabet and Microsoft present quarterly figures, followed by Facebook owner Meta on Wednesday. Amazon and Apple publish their results on Thursday.
Asian stock exchanges are also trading inconsistently on Tuesday. In Tokyo, the Nikkei quotes slightly lower. The Hang Seng gains +1.6% in Hong Kong, and the Shanghai Composite advances +0.8%.
Europe's fears seem to be justified after all: Russia’s state-owned company Gazprom has announced that it will curtail gas deliveries through the Nord Stream 1 pipeline. As of Wednesday, only 20% of the maximum capacity will flow to Germany every day, Gazprom announced on Monday. According to the company, the reason for this is the overhaul of a turbine. Germany’s economy ministry has opposed this statement, saying there is no technical reason for the reduction in supply volumes. Some European countries, including Germany, are already struggling to fill gas storage facilities for the winter. If supplies are cut again, there is a threat of rationing for industry.
EU member states are holding an extraordinary meeting in Brussels today to agree on an emergency plan to reduce gas consumption, reports Deutsche Presse-Agentur. They intend to reduce the risks that could result from a complete interruption of Russian gas supplies. The plan calls for individual countries to voluntarily reduce consumption by 15% from Aug. 1, 2022, to March 31, 2023, to prevent supply shortages.
Gas prices have risen significantly following Gazprom's announcement. On Monday TTF futures contracts on the energy exchange in the Netherlands rose by up to +10% to EUR 177 per megawatt hour – five times higher than prices one year ago. Only last Thursday, Russia resumed energy deliveries to Europe after Nord Stream 1 was shut down for ten days for routine maintenance. Gazprom had already reduced gas deliveries via the pipeline to 40% in June.
Financial markets continue to bet on a steep interest rate hike path of the Federal Reserve. Accordingly, most analysts expect that the monetary authorities will raise the target range for the federal funds rate on Wednesday by +75 basis points to 2.25 to 2.5%. By the end of the year, key interest rates are forcasted to rise to around 3.5%. However, it is becoming increasingly difficult for the Fed to fight inflation with rising interest rates without choking off the economy. Numerous economists now expect the US economy to slide into recession over the next twelve months. This is also reflected in interest rate expectations: thus, financial markets assume that the Fed will have to make a U-turn in early 2023 and lower key interest rates again to support the economy.
Sentiment among German companies deteriorated significantly in July. The Ifo business climate index, Germany's most important leading indicator, fell by -3.6 points to 88.6 points compared with the previous month, the Ifo Institute reported on Monday. This is the lowest level in two years. Analysts had expected a decline, but only to 90.1 points. “Germany is on the threshold of recession,” Ifo President Clemens Fuest commented, referring to high energy prices and the threat of gas shortages. The downbeat trend runs through all sectors of the economy. In manufacturing, for example, sentiment is as pessimistic as it was last in April 2020, when the first wave of the pandemic was spreading. But sentiment has also deteriorated in the service sector, in tourism and the hospitality industry.
The German economy is currently facing numerous challenges. At the top of the list of concerns are the energy crisis and rapidly rising consumer prices. However, ongoing problems in supply chains and rising capital market rates are also dampening the mood. Last week, the European Central Bank (ECB) raised key interest rates for the first time in eleven years and hiked interest rates by 50 basis points.
|15:00||US||S&P/Case Shiller Home price index (May, y/y)||+21.2%|
|16:00||US||Consumer confidence (July)||98.7|
|16:00||US||New home sales (June, m/m)||+10.7%|
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, E-Mail: firstname.lastname@example.org
Source: LGT Bank (Switzerland) Ltd.
Risk Disclosure (Disclaimer)
This publication is an advertising material / marketing communication. This publication is intended only for your information purposes. It is not intended as an offer, solicitation of an offer, or public advertisement or recommendation to buy or sell any investment or other specific product. The publication addresses solely the recipient and may not be multiplied or published to third parties in electronic or any other form. The content of this publication has been developed by the staff of LGT and is based on sources of information we consider to be reliable. However, we cannot provide any confirmation or guarantee as to its correctness, completeness and up-to-date nature. The circumstances and principles to which the information contained in this publication relates may change at any time. Once published information is therefore not to be interpreted in a manner implying that since its publication no changes have taken place or that the information is still up to date. The information in this publication does not constitute an aid for decision-making in relation to financial, legal, tax or other matters of consultation, nor should any investment decisions or other decisions be made solely on the basis of this information. Advice from a qualified expert is recommended. Investors should be aware of the fact that the value of investments can decrease as well as increase. Therefore, a positive performance in the past is no reliable indicator of a positive performance in the future. The risk of exchange rate and foreign currency losses due to an unfavorable exchange rate development for the investor cannot be excluded. There is a risk that investors will not receive back the full amount they originally invested. Forecasts are not a reliable indicator of future performance. In the case of simulations the figures refer to simulated past performance and that past performance is not a reliable indicator of future performance.
The commissions and costs charged on the issue and redemption of units are charged individually to the investor and are therefore not reflected in the performance shown. We disclaim, without limitation, all liability for any losses or damages of any kind, whether direct, indirect or consequential nature that may be incurred through the use of this publication. This publication is not intended for persons subject to a legislation that prohibits its distribution or makes its distribution contingent upon an approval. Persons in whose possession this publication comes, as well as potential investors, must inform themselves in their home country, country of residence or country of domicile about the legal requirements and any tax consequences, foreign currency restrictions or controls and other aspects relevant to the decision to tender, acquire, hold, exchange, redeem or otherwise act in respect of such investments, obtain appropriate advice and comply with any restrictions. In line with internal guidelines, persons responsible for compiling this publication are free to buy, hold and sell the securities referred to in this publication. For any financial instruments mentioned, we will be happy to provide you with additional documents at any time and free of charge, such as a key information document pursuant to Art. 58 et seq. of the Financial Services Act, a prospectus pursuant to Art. 35 et seq. of the Financial Services Act or an equivalent foreign product information sheet, e.g. a basic information sheet pursuant to Regulation EU 1286/2014 for packaged investment products for retail investors and insurance investment products (PRIIPS KID).