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LGT Navigator: Jackson Hole central bank conference in focus

August 24, 2020

On capital markets, the annual Central Bank Symposium is likely to be the main focus of interest in the new week. On Friday, the latest US economic indicators have spread some optimism, with purchasing managers' indices and housing market data exceeding expectations. Equity markets at the beginning of the week are also enjoying supported by hopes for a successful immunoplasm therapy against Covid-19. In Europe, however, rising Covid-19 infection figures, travel warnings and concerns about new restrictions are likely to continue to weigh on investor confidence.

Virtual Jackson Hole central bank meeting in the spotlight

For the first time in its 40-year history, the meeting of the Federal Reserve's top representatives on August 27-28 will not be held in Jackson Hole, Wyoming, as usual, but via video conference due to the pandemic. The rendezvous of Jerome Powell, Christine Lagarde & Co. is themed Navigating the decade ahead and the implications for monetary policy“.

On the Asian stock markets, most indices started the new trading week with gains. Reports of a new treatment option for coronavirus infections were positively received. The US Food and Drug Administration (FDA) approved the use of a blood plasma-based method as an emergency treatment for Covid-19 patients. The US government is also expected to approve an accelerated approval procedure for a promising vaccine candidate from the British pharmaceutical company AstraZeneca for use in the United States. In Tokyo, the Nikkei index, which comprises 225 stocks, was quoted at 22 986.63 (+0.29%) on Monday morning and in Hong Kong the Hang Seng index rose by +1.4%. The positive performance of Wall Street also helped. The Dow Jones Industrial rose by +0.69% to 27 930.33 points before the weekend and the broad S&P 500 climbed by +0.34% to 3 397.16 points.

FDA grants emergency approval for Covid-19 immunoplasm therapy

When treated with blood plasma containing antibodies against the coronavirus, patients are to receive plasma from people who had produced antibodies after a natural infection. However, it is completely unclear how effective the therapy will be. The head of the US Food and Drug Administration (FDA), Stephen Hahn, spoke of limited, but so far promising data on efficacy. Moreover, the emergency approval does not correspond to a formal approval, for which much higher hurdles apply. However, this did not prevent US President Donald Trump from announcing the news in person in the hope of scoring points in the current election campaign. The emergency approval is a “historic breakthrough“ and the therapy promises an incredible success rate, Trump said. Today also marks the start of the Republicans' party conference, at which Trump will be nominated as the official candidate for the election on November 3. In the meantime, around 177 000 people have died in the United States as a result of Covid-19 and around 5.7 million people have become infected with the Sars-CoV-2 virus.

Some success for Democrats in the US Postal dispute

The postal vote has a special meaning in the US in times of corona. While Republicans are trying to limit the possibility of voting by mail, Democrats are doing everything possible to ensure that a postal vote can be conducted smoothly. Now the Democrats in the House of Representatives, with the help of 20 Republicans, were able to push through a bill to strengthen the state postal service, promising the Post Office a USD 25bn cash injection. However, the Republican majority leader in the Senate, Mitch McConnell, immediately declared that the Senate would not approve the bill, and the White House had also previously declared that President Trump would veto it.

Corporate sentiment in the euro zone clouds over again

The companies in the euro area surveyed by IHS Markit were again much more pessimistic according to the latest survey results. Against the backdrop of the widespread resurgence in Covid-19 infection figures, the combined purchasing managers' index for the industrial and services sectors fell to 51.6 points in August from 54.9 the previous month. Analysts had anticipated only a moderate decline to 54.6 points. Thus, the recovery seems to be losing momentum again after the massive slump caused by the Corona crisis. According to IHS Markit, the Euro economy is currently at a crossroads. Either growth will accelerate again in the coming months after the initial upswing, or it will continue to falter. This depends largely on whether the corona pandemic can be contained.

Brexit talks at a dead end

The newly opened negotiations on an agreement for the period after the Brexit transition phase have so far produced no results. EU chief negotiator Michel Barnier expressed his frustration, saying that valuable time was being wasted and that the talks had given the impression of going backwards instead of forwards. British chief negotiator David Frost, on the other hand, accused the European Union of unnecessarily complicating the negotiations. The transition period expires at the end of the year and a possible agreement must first be ratified by the European Parliament, the EU countries and the British Parliament.

 

 

Economic Indicators August 24

MEZ Country Indicator Last
14:30 US Chicago Fed National Acivitiy Index (July) +4.11

Earnings Calendar August 25

Country Corporate Period
SZ Swiss Prime Site H1
IE Medtronic Q1

 

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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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