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LGT Navigator: Fragile market sentiment

October 7, 2021

Volatility on the capital markets increased noticeably in the face of a variety of uncertainty factors. Hopes of an agreement in Washington in the dispute over raising the US debt ceiling and Russia's intention to counter the growing global natural gas crisis led to renewed confidence on Wall Street and Asia's stock market, resulting in a recovery from the previous losses. However, the overall mood remains marked by concerns about the economy and inflation, as well as fears that interest rates will be tightened more quickly than expected. The focus is now on the US labor market report on Friday.

Fragile market sentiment

The Dow Jones Industrial fell yesterday initially below the mark of 34,000 points, but then recovered and closed +0.3% higher at 34,416.99 points. The broad S&P 500 rose +0.48% to 4,363.55 points and the Nasdaq 100 recorded a daily gain of +0.63%. Optimism was provided by the announcement of Mitch McConnell, the leader of the Republicans in the Senate, not to block an extension of the debt ceiling until December. Sentiment was also supported by stronger-than-expected US jobs data from ADP (Automatic Data Processing) and news that US President Joe Biden and China's leader Xi Jinping plan a virtual meeting in the coming weeks.

Job growth in the US private sector picks up again

In the United States, private sector employment performed better than expected in September. According to labor market service provider ADP, 568,000 new jobs were created last month, up from 340,000 in August. Analysts had expected an average gain of 425,000 jobs. Although job growth slowed from the second quarter, the labor market recovery continues, according to ADP. The monthly report is based on a survey of about 460,000 US companies with about 26 million employees and is considered an indicator for the official labor market report due Friday.

IMF sees inflation moderating again in the medium term

According to estimates by the International Monetary Fund (IMF), the sharp rise in inflationary pressure will ease by mid-2022 and return to pre-corona crisis levels. According to the IMF's latest World Economic Report, inflation in the advanced economies is expected to peak at +3.6% at the end of 2021 and fall back to +2% in the first half of 2022. In emerging economies, the IMF expects inflation to peak on average at +6.8% and then decline to +4%.

New Zealand's central bank responds to increasing inflationary pressure

The Reserve Bank of New Zealand raised its key interest rate by a quarter of a percentage point to +0.5%. The first rate hike since 2014 is the central bank's response to rising inflationary pressures. According to the central bank, the inflation rate could rise to 4% in the short term. Accordingly, the central bank signaled that it would tighten interest rates further if necessary. However, the interest rate move had been expected on the capital markets.

German industry reports sharp fall in orders

After a strong increase in orders in recent months, German industry reported a sharp decline in August. Over the year, orders fell by -7.7%, which according to the Federal Statistical Office in Wiesbaden was mainly due to a lack of major orders (e.g. for aircraft, ships or trains). However, even without this component, orders fell by around -5%. The industry is being hampered by continuing supply bottlenecks for important parts and raw materials.


Economic Indicators October 7

MEZ Country Indicator Last period
07:45 SZ Unemployment Rate (September)  2.9%
08:00 GE Industrial Production (August, m/m) +1.0%
13:30 EZ ECB Minutes
14:30 US Initial Jobless Claims (weekly) 362,000


Earnings Calender October 7

Country Company Period
SZ Sika Investor Day


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