Skip navigation Scroll to top
Scroll to top

LGT Navigator: Investor sentiment in the euro zone deteriorates noticeably

October 8, 2019

The Sentix economic index for Germany and the euro zone slipped deeper into the red in October due to increasing economic concerns and shows a noticeable deterioration in investor sentiment.

"A positive reaction to the central banks' aid measures failed to materialize, and economic assessments are falling across the board," explained Sentix Managing Director Patrick Hussy. For Germany, the economic index fell from -12.8 to -19.4 points, the lowest level since July 2009. The economic index for the euro zone fell from -11.1 to -16.8 points, the lowest level since March 2013.

Orders received by German industry fall in August

Order intake by German industry in August was weaker than expected. According to the German Federal Statistical Office (Destatis), it fell by -0.6% compared to the previous month. Thus, the downward trend of recent months continued contrary to expectations. The economists surveyed by Dow Jones Newswires had forecast an increase of +0.2%.

Banks in the euro zone mostly well equipped for crisis situations

ECB supervisors have recently resumed the biennial stress test with over 100 credit institutions in the euro area. The aim is to find out how many days banks can "continue to operate on the basis of available means of payment and collateral without access to refinancing markets" in the event of a shock. If customers were to withdraw large sums of money in a short period of time, the liquidity situation at most banks would look "comfortable" overall, the ECB supervisor said yesterday. According to this, about half of the financial institutions would hold out for more than six months without having to rely on outside capital. In the case of extreme distortions, it would be more than four months. This would give institutions more time to react to financial turmoil than before the severe financial crisis in 2008, which prompted supervisors to tighten regulations in general.

Portugal's bonds supported by political stability

At the height of the euro crisis in 2012, the yield on ten-year Portuguese government bonds was still 15 percentage points higher than that of their German counterparts. In the meantime, the risk premium has fallen to 0.7 percentage points. In addition to robust economic growth, a reduction in the budget deficit from eleven to 0.5% of GDP contributed to this. Most recently, the credit rating upgrade by the rating agency DBRS from "BBB" to "BBB (high) with stable outlook" and the outcome of last Sunday's parliamentary elections also boosted investor confidence. With 37% of the vote, Prime Minister António Costa's Socialist Party emerged stronger from the elections and can continue its minority government. As a result, the yield on ten-year securities fell yesterday to an all-time low of around 0.11%.

What you should keep in mind this week

Tuesday

  • US Federal Reserve Chairman Jerome Powell to speak at NABE (National Association of Business Economics) Annual Conference in Denver
  • Development of US producer prices in September
  • NFIB tuning barometer for small US companies
  • Caixin Purchasing Managers Index for China's service sector

Wednesday

  • Publication of minutes of US Fed meeting in September

Thursday

  • Start of two-day talks in Washington between China's trade delegates around Vice Premier Liu He and their American counterparts
  • Development of US consumer prices in September
  • France and Italy's industrial production in August
  • Publication of the minutes of the September ECB meeting

Friday

  • University of Michigan Consumer Confidence Index in September

Economic Indicators October 8

MEZ Country Indicator Last
03:45 CN Caixin Services PMI 52.29
08:00 DE Industrial Production (y/y) -4.27%
14:30 US Producer Prices (y/y) 1.80%

Earnings Calendar October 8

Country Corporate Period
SZ Aryzta Y

 

 

Follow us on TwitterFacebook or LinkedIn, where we inform you about latest market developments and LGT News. Further informationen is available on: LGT Social Media.

LGT Research Publications subscription 

Imprint
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.

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.

Impressum
Herausgeber: LGT Bank (Schweiz) AG, Glärnischstrasse 36, CH-8027 Zürich
Redaktion: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Quelle: LGT Bank (Schweiz) AG
Core Personal Consumption Expenditure
MEZCountryIndicatorLast08:00DERetail Sales (y/y)-1.7%08:45FRConsumer Prices EU Harmonized (y/y)1.4%09:00ESGDP (y/y)2.4%09:55DEUnemployment Rate5.0%11:00EUGDP (y/y)1.2%11:00EUCore Consumer Prices (y/y)1.1%11:00EUUnemployment Rate7.5%11:00ITConsumer Prices EU Harmonized (y/y)0.8%12:00ITGDP (q/q)0.12%14:15USADP Employment Report102k20:00USFederal Funds Target Rate2.5%