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LGT Navigator: Investors remain cautious after strong earnings

February 4, 2021

The stong earnings of Alphabet and Amazon failed to give stock markets a strong boost. In Italy, former ECB chief Mario Draghi is set to form a new government. Consumer prices in the eurozone rise at the start of the year for the first time since the outbreak of the corona pandemic.

Wall Street

The strong earnings of the US tech giants Alphabet and Amazon were not able to give stock markets a sustained momentum on Wednesday. Although the technology index Nasdaq Composite initially took aim at a new record, the gains quickly crumbled and the barometer closed little changed from the previous day. The S&P 500 climbed for the third day in a row and closed +0.1% firmer, the Dow Jones Industrial also rose +0.1%. 

After record sales in the final quarter, the shares of Google parent Alphabet were in demand and increased by +7.3%. In contrast, the shares of Amazon declined (-2%), although the world's largest online retailer can look back on an extremely successful business quarter. The group has announced on Wednesday surprisingly a change at the top of the group. Thus, Amazon founder Jeff Bezos will retire as CEO.

In Asia, stock markets are trading with losses on Thursday. In Tokyo, the Nikkei loses more than -1% and in Hong Kong, the Hang Seng declines about -1.1%. The Shanghai stock exchange trades -0.6% weaker.

Draghi to the rescue

In Italy, a well-known face is taking on the task of forming a new government. On Wednesday, Italian President Sergio Mattaralla appointed Mario Draghi, the former head of the European Central Bank, to put together a cabinet of experts. Earlier, talks to save the current governing coalition of the Five Star Movement and the Partito Democratico had failed. Prime Minister Giuseppe Conte, who has no party affiliation, submitted his resignation on Jan. 26 after the alliance broke apart. Draghi faces the difficult task of forming a government capable of securing a majority. The strongest force in parliament, the Five Star Movement, has already ruled out working with him. The former ECB president knows his way around crises: during his tenure, the eurozone experienced its most severe turbulence to date. In July 2012, at the height of the euro crisis, Draghi promised to do everything he could to save the euro – ”whatever it takes“ were the words Draghi used to calm financial markets at the time. Now the 73-year-old native of Rome is expected to pave the way to lead Italy out of the economic crisis that was triggered by the corona pandemic.

Prices in the eurozone rise again

The annual inflation rate in the eurozone climbed in January to the highest level since the outbreak of the corona crisis. According to the statistics authority Eurostat, the inflation rate rose to +0.9% after consumer prices fell in the past five months. The reason for falling prices was the economic slump after the corona shock as well as low energy prices. The European Central Bank (ECB) is aiming for an annual inflation rate of just under 2% in the medium-term, but has been missing this target for years.

US service providers more optimistic

Sentiment in the US service sector has brightened surprisingly at the start of the year. The ISM index for the service industry rose to 58.7 points in January and improved by 1 point month-on-month. Analysts had expected a decline, as the industry is suffering particularly from the measures taken to contain the coronavirus. The development is also surprising because the outlook for the industrial sector, which is less affected by the corona restrictions, has clouded over the same period, as shown by the ISM manufacturing index at the start of the week.



Economic Indicators February 4

MEZ Country Indicator Last
07:45 CH Seco Consumption Indicator (Q1) -30.0
10:00 EZ ECB Monthly Bulletin
11:00 EZ Retail Sales (m/m, December) -6.1%
13:00 GB BoE Interest Rate Decision
14:30 US Initial Jobless Claims 847'000

Earnings Calendar February 4

Country Corporate Period
CH Roche Q4
CH Swisscom Q4
GER Deutsche Bank Q3
GER Merck Co. Q4
US Bristol-Myers Squibb Q4
US Ford Motors Q4
US Gilead Sciences Q4
US Philip Morris Q4


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