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LGT Navigator: Fed to kick off tapering

November 3, 2021

The Federal Reserve could give the go-ahead tonight to end its ultra-expansive monetary policy. In doing so, the Fed must weigh the risks of potentially overshooting inflation and an economic recovery threatened by supply chain problems and the pandemic. Capital markets are expecting Fed Chairman Powell to give the go-ahead for tapering, or the withdrawal of quantitative easing (QE), today.

Fed to kick off tapering

Federal Reserve Chairman Jerome Powell is most likely to announce tonight that the Fed will reduce its bond-buying program and end it by mid-2022. To date, the central bank has purchased bonds in the volume of USD 120 billion per month. The background to this is the ongoing recovery of the economy from the corona crisis, even if this has recently stalled due to supply chain problems. However, the uncertain inflation outlook is also likely to play an important role. Even if the Fed (as well as the ECB) continue to assume that inflationary pressures are of a “temporary” nature, the Fed is likely to want to play it a bit safe here and provide timely countermeasures.

On Wall Street, meanwhile, the record series continued, supported by good quarterly results, such as the US pharmaceutical giant Pfizer, which raised its annual targets. The Dow Jones Industrial closed +0.39% higher at 36'089 points. The broad S&P 500 also gained +0.37% to 4'630.65 points. Further up was also on the technology exchange Nasdaq. The Nasdaq 100 gained +0.42% and went out of the day's business at 15'972.49 points.

US Republicans win sentiment test

The Republican Glenn Youngkin has won narrowly in the governor's election in the US state of Virginia, which is considered a test of sentiment. For US President Joe Biden and the Democrats, the election means a defeat and could be a bad omen for the congressional elections coming up in a year. Youngkin, who had received support from former President Donald Trump during the campaign, defeated President Biden-backed candidate Terry McAuliffe.

Supply chain problems weigh on euro industry

Industrial companies in the eurozone were somewhat more cautious in October considering ongoing production disruptions. This was reflected in the Purchasing Managers' Index (PMI) from London-based market research institute IHS Markit, which slipped to 58.3 points from 58.6 points in September. From 50 points, the industrial barometer signals growth, below that on a contraction. More and more companies complained about supply problems and the impact of rising costs and prices, commented IHS Markit chief economist Chris Williamson.

Economic Indicators November 3

MEZ Country Indicator Last period
00:00 JP Holiday
10:30 EZ IHS Markit PMI Composite (October) 56.8
11:00 EZ Unemployment Rate (September) 7.5%
11:15 EZ ECB President Lagarde Speach
13:15 US ADP Employment Private Sector (October) +568,000
13:30 US Trade Balance (September)  USD -73.3bn
14:45 US IHS Markit PMI Composite (October) 57.3
15:00 US Durable Goods Orders (September)  +1.2%
16:00 US ISM Non-Manufacturing PMI (October) 61.9
19:00 US FOMC Monetary Policy Announcement +0.25%
20:30 US Fed Press Conference


Earnings Calender November 3

Country Company Period
SZ Oerlikon Q3
SZ Swiss Re Q3
SZ Geberit Q3
SZ Vontobel Q3
GE Lufthansa Q3
AUT Raiffeisen International Q3
FR Suez Q3
IT Intesa Sanpaolo Q3
SP Endesa Q3
DNK Vestas Q3
DNK Novo Nordisk Q3
US Qualcomm Q3
US Qiagen Q3
US Allstate Q3
US Electronic Arts Q3
US Marriott International Q3
US New York Times Q3


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Source: LGT Bank (Switzerland) Ltd.

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