Skip navigation Scroll to top
Scroll to top

LGT Navigator: Increasing risk awareness

July 7, 2021

A slowdown in growth in the US service sector led to restraint among blue chips on Wall Street after the holiday-related long weekend, while technology stocks were in demand. In general, an increase in risk awareness or risk aversion of investors can be observed in the short term. Today, the focus is on the minutes of the latest monetary policy decision of the Federal Reserve, from which investors hope for new insights into the future direction of the Fed.

Increasing risk awareness

After the long weekend and losses on Europe's stock markets, investors were cautious on the New York Stock Exchange. As a result, the Dow Jones Industrial declined -0.6% to 34,577.37 points and the S&P 500 fell from record levels -0.2% to 4,343.54 points. Technology stocks fared better. Thus, the Nasdaq 100 selection index improved on Tuesday by +0.4% and closed at 14'786.36 points.

Asian equity markets suffered on Wednesday from an increased risk aversion of investors in view of the uncertain pandemic development in the region. The MSCI index of Asia-Pacific shares (excluding Japan) fell about half a percent, while in Tokyo the Nikkei 225 index lost about -1.3%. At the same time, the recent rally in US government bonds continued, with the yield on 10-year Treasuries easing to 1.35%, the lowest level since February 24.

US services sector running out of steam somewhat

In the United States, growth in the service sector slowed again somewhat in June, held back by shortages of labor and raw materials. The Purchasing Managers' Index (PMI) of the Institute for Supply Management (ISM) fell from 64.0 points in May to 60.1 points. Mind you, the previous month's reading is a record high. However, the PMI for the service sector, which accounts for more than two-thirds of US economic activity, remains well above the 50-point growth threshold. The ISM survey was confirmed by the London-based IHS Markit's Purchasing Managers Index, which was of the same gauge, weakening to 64.6 in June from 70.4 the previous month. As a result, the composite index for the US private sector – industry and service providers combined - also slipped to 63.7 points from 68.70.

ZEW economic expectations surprisingly weakened

According to the latest survey results of the Mannheim Center for European Economic Research (ZEW), the economic expectations for Germany of the monthly surveyed financial analysts and institutional investors have deteriorated more strongly than expected in July. Accordingly, the corresponding indicator dropped from 79.8 points in June to 63.3 points in July. On average, analysts had expected a decline to 75.0 points. Overall, however, economic expectations remained at a very high level –in May, the index reached its highest level in around 20 years at 84.4 points. According to the ZEW, many financial market experts anticipate an above-average positive macroeconomic situation over the next six months.

ECB Governing Council reviews monetary policy strategy

According to a report by the financial market service provider Bloomberg, the top body of the European Central Bank (ECB) is currently discussing its monetary policy strategy. For example, the future design of the inflation target – symmetric inflation target with more flexibility or explicitly allowing higher inflation rates – is to be discussed. The future composition of corporate bond purchases is also to be a topic. An increasingly important component of bond purchases is the carbon footprint of issuers. Another issue could be the cooperation of monetary and fiscal policy. The ECB has already announced that it will present the results of its strategic review in the fall.

Economic Indicators July 7

MEZ Country Indicator Last period
08:00 GE Industrial Production (May, m/m) -1.0%
11:00 EZ European Union Economic Forecasts
20:00 US FOMC Minutes


Earnings Calender July 13

Country Company Period
AUT Telekom Austria Q2 
US JPMorgan Chase Q2
US Goldman Sachs Q2
US PepsiCo Q2


LGT helps you make informed investment decisions

All about global economic and market trends at a glance

Subscribe to LGT's research newsletters

You can also follow us on Facebook or LinkedIn – or visit MAG/NET and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

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

Risk Disclosure (Disclaimer)
This publication is an advertising material / marketing communication. This publication is for your information only and is not intended as an offer, solicitation of an offer, or public advertisement to buy or sell any investment or other specific product. Its content has been prepared by our staff and is based on sources of information we consider to be reliable. However, we cannot provide any confirmation or guarantee as to its being correct, complete and up to date. The circumstances and principles to which the information contained in this publication relates may change at any time. Information that has been published should therefore not be understood as implying that no change has taken place since its publication or that it is still up to date. The information in this publication does not constitute an aid for decision-making in relation to financial, legal, tax-related or other consulting matters, nor should any investment decisions or other decisions be made on the basis of this information alone. It is recommended that advice be obtained from a qualified expert. Investors should be aware that the value of investments can fall as well as rise. Positive performance in the past is therefore no guarantee of positive performance in the future. Investments in foreign currencies are also subject to fluctuations in exchange rates. We disclaim all liability for any loss or damage of any kind, whether direct, indirect or consequential, which may be incurred through the use of this publication. This publication is not intended for persons subject to legislation that prohibits its distribution or makes its distribution contingent upon an approval. Any person coming into possession of this publication shall therefore be obliged to find out about any restrictions that may apply and to comply with them. In line with internal guidelines, persons responsible for compiling this report are free to buy hold and sell the securities referred to in this report.