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LGT Navigator: Europe's stock markets can shake off recent losses

September 8, 2020

While the US stock markets remained closed on Labor Day, European stock market indices recovered from their recent setback at the beginning of the week. Positive economic indicators from the eurozone and China as well as the prospect of continued expansive central bank policies supported equity prices. In Asia, however, renewed tensions between the United States and China and a stronger than expected collapse of the Japanese economy in the second quarter weighed on investors' sentiment.

Europe's stock markets can shake off recent losses
Frankfurt Stock Exchange

The EuroStoxx 50 rose by +1.64% to 3 314.07 points at the start of the week, after the leading European index had lost some ground in the last week, driven by profit-taking on Wall Street. In Frankfurt the DAX rose by +2% on Monday and in Paris and London a daily gain of +1.8% and +2.4%, respectively was recorded. The FTSE 100 benefited from a pound weakened by the stalled Brexit negotiations. In Asia, stock prices were once again weighed down by tensions between the US and China, after US President Donald Trump warned to restrict trade relations with China. However, this must certainly be seen against the background of the ongoing election campaign.

Japan's economy records a record slump

Against the backdrop of the corona crisis, the world's third largest economy recorded an unprecedented annualized decline of -28.1% in the second quarter. The pandemic is also affecting consumer spending in particular, which fell by -7.6% in July compared with the same period in the previous year. As economic output had already declined in the two previous quarters, Japan is already in recession. Next week, the Bank of Japan will decide on its further monetary policy course. An adjustment is currently not expected on the capital markets.

German investors remain confident according to Sentix

The monthly published sentiment barometer of the German financial analysis company Sentix showed that the economic outlook of the surveyed investors continued to brighten in September. The indicator rose for the fifth month in a row to minus eight points. The economic recovery following the corona-induced slump in the global economy continued at the beginning of September. However, the recession has not yet been overcome, commented Sentix on the latest survey results. The analyst firm surveys around 1 000 investors every month. The current survey was conducted from 3rd to 5th September.

New round of Brexit already deadlocked?

The resumption of talks on Britain's relations with the European Union following the departure of the UK already seems to be under a bad sign. Shortly before the round of talks on the Brexit follow-up agreement, British Prime Minister Boris Johnson had called on the EU to show more speed and responsiveness. Time is pressing. An agreement must be reached by mid-October so that a deal can be ratified at all. Otherwise there is still a threat of “hard“ Brexit. The British chief negotiator David Frost added that Great Britain has nothing to fear in the event of a “No Deal Brexit“. EU negotiator Michel Barnier is now expected in London today for a new round of talks.



Economic Indicators September 8

MEZ Country Indicator Last
08:00 GE Exports (July, m/m) +14.9%
08:00 GE Imports (July, m/m) +7.0%
11:00 EZ GDP Q2 (revision, q/q) -12.1%

Earnings Calendar September 13

Country Corporate Period
US Oracle Q1


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Source: LGT Bank (Switzerland) Ltd.

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