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LGT Navigator: Investors take cover ahead of central bank meeting

August 23, 2022

Renewed economic and inflation concerns put stock markets around the world under pressure at the start of the week. With an eye on the meeting of central bank heads from around the world to be held in Jackson Hole at the end of this week, stock investors took cover for the time being. This. The mood was also dampened by signals from the European Central Bank. For example, Bundesbank President Nagel demanded that the ECB continues to raise interest rates, even if the risks of recession in Germany are increasing.

Investors take cover ahead of central bank meeting

On the New York Stock Exchange, inflation and economic concerns dominated at the start of the week, bringing the recent rally to an abrupt end. The Dow Jones Industrial closed at 33,063.61 points -1.91% lower than on Friday and the S&P 500 lost -2.14% – closing at 4,137.99 points. On the Nasdaq technology exchange, the indices even fell by about -2.7%. In turn, the yield of ten-year US government bonds climbed to 3.03%. The euro fell against the US dollar at the beginning of the week for the first time since mid-July below parity and reached at times a low of 0.9970, respectively, the lowest value in more than five weeks.

The stock markets in the Asia-Pacific region followed the negative templates from overseas on Tuesday and trended mostly in negative territory. In Tokyo, the Nikkei 225 trades around -1.2% lower and in Hong Kong, the Hang Seng index loses around -0.3%. In parts of China, meanwhile, the drought and heat wave that has been going on for weeks is causing power shortages. As a result, most shopping malls in the southwestern Chinese metropolis of Chongqing, for example, had to shorten their opening hours to reduce the power consumption of air conditioners.

Fed to hike “only” 50 basis points in September, according to Reuters poll

The Federal Reserve will raise interest rates by 50 basis points at its next meeting on Sept. 21. At least, that's how a majority of analysts see it in a recent poll conducted by the Reuters news service from August 16 to 19. The background to this is the expectation that inflation may have peaked by now and that recession worries are on the rise. Specifically, 76 of 94 economists surveyed forecast a “more moderate” interest rate move of half a percentage point, whereas 18 analysts anticipate another 75-basis point increase.

Bundesbank expects further economic slowdown

According to the German Bundesbank, the outlook for the German economy has deteriorated further and a further slowdown in the winter half-year has become “significantly more likely.” In its monthly report, the central bank referred to the unfavorable development of energy prices and the high level of uncertainty regarding gas supplies in the coming winter, which is likely to weigh heavily on private households and companies. As a result, inflation in Germany is expected to be in the region of 10% in the fall.

UK economy recorded its sharpest slump in more than 300 years in 2020

According to the Office for National Statistics, the -11% drop in economic output during the Corona pandemic in 2020 caused the sharpest fall in gross domestic product in the UK since 1709!

Economic Indicators August 23

MEZ Country Indicator Last period
09:15 FR PMI Composite (August) 51.7
09:30 GE PMI Composite (August) 48.1
10:00 EZ PMI Composite (August) 49.9
10:30 UK PMI Composite (August) 52.1
15:45 US PMI Composite (August) 47.7
16:00 US New Home Sales (July, m/m) -8.1%
16:00 EZ Consumer Sentiment (August) -27.0


Earnings Calender August 23

Country Company Period
DE Douglas Q3
US Medtronic Q1
US Nordstrom  Q2
US Urban Outfitters Q2


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