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LGT Navigator: Market sentiment remains characterized by restraint

February 8, 2022

At the beginning of the week, the international stock markets were dominated by a cautious attitude on the part of investors, characterized by the anticipated turnaround in interest rates by the Federal Reserve and the inflation data due from the United States on Thursday. Following the strong US labor market report last Friday, the capital markets now expect at least five interest rate hikes by the Federal Reserve this year. While the corporate reporting season also remains in focus on the stock markets, the Ukraine conflict is also causing increased uncertainty.

Market sentiment remains characterized by restraint

In New York, once again, technology stocks in particular posted losses on Monday. The indices on the Nasdaq lost about -0.85%. The broad S&P 500 opened the week with a daily minus of -0.3%, while the Dow Jones Industrial could hold at least unchanged from Friday at 35'091.13 points. In Asia, no clear trend was again apparent on Tuesday morning. Meanwhile, the gold price, against the backdrop of geopolitical uncertainties related to the Ukraine conflict and the upcoming inflation data from the US, stood at USD 1'820 per ounce. 

Investor sentiment in the eurozone improved again

According to the latest survey results, the approximately 1'200 analysts and intentional investors regularly surveyed by the financial market analysis company Sentix were more optimistic. The Sentix economic indicator rose by 1.7 points to 16.6 in February, thus improving for the second month in a row. Both current and future economic developments in the euro area were assessed more confidently. Meanwhile, developments in the US were “problematic” and in Asia “mixed.”

Headwinds for the ECB's relaxed stance are getting stronger

ECB Governing Council member Klaas Knot expects that the European Central Bank (ECB) will raise key interest rates before the end of the year and that a second-rate tightening could follow in spring 2023. The Dutch central bank chief sees the reasons for this in the rising inflation risks. Regarding the inflation trend, however, Knot emphasized that the situation in the eurozone is not comparable with that in the United States. In the United States, he said, inflation was mainly due to internal reasons, while the bulk of inflation in the eurozone came from abroad, against which the ECB could not do much. The view that inflation is more sustainable than initially assumed seems to be gaining ground within the central bank. ECB President Christine Lagarde also gave the first indications of a tighter monetary policy at the last interest rate decision last week. In the eurozone, the annual inflation rate now stands at +5.1%.

ESM chief shakes up euro criteria

Klaus Regling, head of the euro bailout fund ESM, is calling for the stability fund to be set up permanently and for the stability and growth pact to be relaxed in order to be able to react quickly to crisis situations at any time. Raising the euro debt ceiling would make economic sense, the ESM chief says, and proposes raising the debt ceiling from 60% of gross domestic product to 100%. In addition, the deficit limit of 3% of economic output should be relaxed.

  

Economic Indicators February 8

MEZ Country Indicator Last period
10:00 IT Retail Sales (December, m/m) -0.4%
14:30 US Trade Balance (December) USD -80.2bn

 

Earnings Calender February 8

Country Company Period
GE TUI Q1
FR BNP Paribas Annual
NL Qiagen Q4
AUT Telekom Austria Q4
AUT ams-Osram Annual
UK BP  Annual
US Pfizer Q4
US DuPont Q4
US Harley-Davidson Q4

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Tina Haldner, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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