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LGT Navigator: Fed reaffirms its course and tech giants deliver

April 29, 2021

The US Federal Reserve is sticking to its loose monetary policy but was somewhat more confident in its assessment of the economy. As capital markets had expected this outcome, the Fed's interest rate decision did not provide any new impetus for equity markets. However, the US dollar and US government bond yields came under some pressure. At the same time, the quarterly results of the two tech heavyweights Apple and Facebook were convincing. Today, investors are eagerly awaiting the earnings report of Amazon.

Fed reaffirms its course

On the American equity markets the monetary policy decision of the Fed was received without large swings. The Dow Jones Industrial closed -0.48% lower at 33,820.38 points, while the S&P 500 posted another record high at 4,201.53 points, but then stayed virtually unchanged at 4,183.18 points (-0.08%). On the Nasdaq, daily losses of almost -0.5% were observed. In addition to the Fed decision, the quarterly results of Apple and Facebook were also in focus yesterday after the close of the stock market. The iPhone manufacturer benefited from strong demand for more expensive 5G iPhones and achieved record sales in Q2. Apple also posted a strong increase in profit, significantly beating market expectations. Facebook can build on unabated growth, increasing revenue by +48% year-on-year to USD 26.2bn last quarter, while profit at the world's largest online network rose to USD 9.5bn from USD 4.9bn a year ago.

Fed Governor Powell more confident, but maintains loose stance for now

As expected by most market participants, the Federal Reserve (Fed) left its key interest rate unchanged at a record low level of 0-0.25%. The decision was unanimous in the Monetary Policy Committee FOMC. Fed Chairman Jerome Powell sees no reason to signal a turnaround in interest rates at present, given the pandemic, which has not yet been overcome, and the still difficult situation on the labor market, as well as the low inflation rate in the long term from their point of view. Its securities purchase program of currently USD 120bn per month will also continue. In view of the progress made in the coronavirus vaccination campaign in the US and the fiscal policy support, the Fed is more optimistic about the further development of the US economy. However, the central bank attributes the recent sharp rise in inflation mainly to temporary factors.

ECB President Lagarde sees signs of stronger economic recovery

Christine Lagarde, President of the European Central Bank (ECB) expects a “robust economic recovery in the euro zone” in the second half of the year. She said there were good signs in the economic data and pointed to the purchasing managers' survey figures. Nonetheless, she said, risks to the economy are tilted to the downside in the short term because of the ongoing pandemic, and it is too early to say whether Europe is past the worst of the corona crisis. Therefore, the euro economy continues to need the support of monetary and fiscal policy, Lagarde said.

Biden invokes new beginning and announces another billion-dollar package

On his first speech to Congress, US President Joe Biden invoked a new beginning and profound change after the Trump era. “We are working again, dreaming again, discovering again and leading the world again,” Biden said in the Capitol. In addition to the infrastructure plans already announced, Biden also announced a “family plan” that promises tax breaks for families, an expansion of Social Security benefits and more government support for education costs for children and students. Over the next ten years, around USD 1.8 trillion is to be invested and financed through tax increases, among other things. The president also plans to raise the top tax rate from 37% to 39.6%, thus practically reversing the tax giveaways of his predecessor Trump.



Economic Indicators April 29

MEZ Country Indicator Last
09:00 SP Consumer Prices (April, y/y) +1.2%
09:55 GE Unemployment Rate (April) 6.0%
11:00 EZ Economic Sentiment (April)  101.0
11:00 IT Producer Prices (April, y/y) +0.7%
14:00 GE Consumer Prices (April, y/y) +2.0%
14:30 US GDP Q1 (annualized, q/q) +4.3%
14:30 US Initial Jobless Claims (weekly) 547,000
16:00 US Pending Home Sales (March, m/m) -10.6%
00:00 US President Biden State of the Union Address

Earnings Calender April 29

Country Corporate Period
SK Samsung Q1 
SZ Logitech Q1 
SZ Swisscom Q1
SZ Sulzer Q1 Sales 
SZ Straumann Q1 
GE Lufthansa Q1
FR Total Q1
FR Capgemini Q1
SP Repsol Q1
NL Unilever Q1
GB Royal Dutch Shell Q1
FIN Nokia Q1
US Merck & Co Q1
US Bristol-Meyers Squibb Q1
US Amazon Q1
US Twitter Q1
US McDonald's  Q1
US Caterpillar Q1
US Mastercard Q1
US Kraft Heinz Q1


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Source: LGT Bank (Switzerland) Ltd.

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