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LGT Navigator: How long will the tailwind last?

August 31, 2021

The statements by Federal Reserve Chairman Powell, which were obviously greeted with relief and for the first time dispelled the specter of a hasty turnaround in the Fed's monetary policy, ensured that the mood on the stock markets remained upbeat at the start of the week and in some cases set new records, particularly in New York. While the Fed's monetary policy provided the stock markets with further tailwind, the continuing uncertainties regarding the further development of the pandemic and further signs of a slowdown in growth also provided headwinds.

How long will the tailwind last?

On Wall Street, the S&P 500 and the technology indices continued their record chase yesterday, reaching new record levels during the trading day. The S&P 500 finally gained +0.43% to 4'528.79 points and the Nasdaq Composite closed +0.9% higher than the previous day at 15'265.89 points. The Dow Jones Industrial, on the other hand, exited with a slight daily loss of -0.16% at 35'399.84 points. The friendly mood on the stock markets is still carried by the tailwind of a, at least in the short term, continued expansionary orientation of US monetary policy.

Fed Chairman Jerome Powell had indeed a reduction of the economic supportive quantitative measures (QE) of the central bank probably still before the end of the year in prospect, but also referred to the still high uncertainty of the pandemic development. Overall, Powell did not send an immediate signal for a quick tightening of monetary policy with a view to the next interest rate decision on September 22.

On Asian stock markets, however, the tailwind from the ongoing record chase on Wall Street faded completely. The focus is rather on the feared slowdown in China because of regulatory hurdles as well as economic restrictions due to Corona measures and high commodity prices.

Economic sentiment in the eurozone has peaked for the time being

The general mood in the euro economy clouded over in August. This was revealed by the monthly survey of the European Commission published yesterday. According to the survey, the composite index for the assessment of economic development declined from the record high of 119.0 points in July to 117.5 points. The deterioration in sentiment was most noticeable in France and the Netherlands, while the mood in Germany deteriorated only slightly.

Inflation rate in Germany scrapes the four percent mark

German consumer prices rose by +3.9% year-on-year in August, compared with +3.8% in July. This means that the inflation rate is approaching the 4% mark for the first time in almost 30 years. Just two months ago, the inflation rate was +2.3%. Consumer prices are being driven primarily by energy prices, which have been rising for months against the backdrop of the corona base effect as heating and gasoline rose by +12.6% year-on-year. However, foodstuffs also became more expensive, rising by +4.6% year-on-year in August. The current bottlenecks in the supply chains are also leaving their mark. Growing inflationary pressure is increasingly unsettling consumers. According to a recent survey by the German Institute for Retirement Provision (DIA), a majority of the more than 2'000 consumers questioned expect inflation in Germany to remain as high as it is at present or even to rise above 5% in the coming years.

Inflation rate also continues to climb in Spain

In Spain, consumer prices rose by +3.3% over the year in August. In the previous month, inflation had been +2.9%. Here, too, the main reason is the sharp rise in energy prices due to the corona base effect.

 

Economic Indicators August 31

MEZ Country Indicator Last period
08:45 FR Consumer Prices (August, y/y) +1.5%
08:45 FR GDP Q2 (q/q, revision) +0.9%
09:00 SZ KOF Economic Indicator (August) 129.8
09:55 GE Unemployment Rate (August) 5.7%
10:00 IT GDP Q2 (q/q, revision) +2.7%
11:00 IT Consumer Prices (July, y/y) +1.0%
11:00 EZ Consumer Prices (July, y/y) +2.2%
11:00 EZ Core Consumer Prices (July, y/y) +0.7%
15:00 US S&P/CaseShiller House Prices 20 biggest cities (June, y/y) +17.0%
16:00 US Consumer Confidence (August)  129.1
16:00 US Chicago PMI (August) 73.4

 

Earnings Calender August 31

Country Company Period
SZ Ems Chemie H1

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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