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LGT Navigator: Market sentiment remains tense ahead of Jackson Hole

August 25, 2022

Investors are hardly daring to come out of hiding at the moment, and the focus this week is solely on the upcoming appearance of Fed Chairman Powell at the central bank meeting in Jackson Hole. The central bank, above all the Fed, is faced with the major challenge of countering energy price-driven inflation with a more restrictive monetary policy on the one hand and preventing the fragile economy from sliding into recession on the other. No real impetus was provided by the latest data from US industry on new orders for durable goods or the latest figures from the real estate market in the US.

Market sentiment remains tense ahead of Jackson Hole

The Dow Jones Industrial closed Wednesday +0.18% higher at 32,969.23 points and the S&P 500 went out at 4,140.77 points (+0.29%). On the Nasdaq, the indices gained about +0.3%. The restraint before the highly anticipated appearance of Fed Chairman Jerome Powell at the symposium in Jackson Hole is noticeable on all sides. Powell is likely to emphasize that the Fed still has a long way to go in the fight against inflation, which means that further strong interest rate hikes can be expected. Among individual stocks, it was interesting to note that American fashion retailer Nordstrom beat expectations for second-quarter business performance, but disappointed investors' expectations with a cautious outlook. As a result, Nordstrom shares plummeted by -20%. This is likely to be a further indication of weaker private consumption in the US.

On the bond market, the yield on ten-year US Treasuries rose further to 3.11% shortly before the start of the Jackson Hole central bank meeting. On the foreign exchange market, the euro was able to free itself somewhat from the recent lows but continues to trade just below parity against the US dollar.

On Asia's stock exchanges, the stock indices recorded mostly gains ahead of the symposium in Jackson Hole, which begins today. In Hong Kong, trading initially had to be interrupted due to a typhoon warning. After resumption, the Hang Seng Index gained about +1.5%. In Shanghai, the Composite Index climbed about +0.4% and in Tokyo, the Nikkei 225 rose about +0.6%. China announced meanwhile further economic stimulus packages worth billions to stabilize the weakening economy. According to China's Premier Li Keqiang, the equivalent of around EUR 45 billion is to be made available for the expansion of infrastructure.

US industry reports weak order intake in July

In the United States, orders for durable goods (from washing machines to airplanes) were weaker than expected in July. Compared to the previous month, orders stagnated and thus disappointed analysts' expectations, who had expected a strong increase of +0.8%. On a positive note, however, orders in June were even stronger at +2.2% than initially reported at +2.0%. Orders for capital goods, excluding defense equipment and aircraft, which are indicative of business investment appetite, increased +0.4% in July from the previous month.

Pending home in the US sales drifting lower

Contracts signed to purchase existing homes fell -1% in July from the previous month and slumped nearly -20% for the year, the National Association of Realtors reported. The so-called pending home sales (Pending Home Sales) have thus fallen against the backdrop of higher mortgage rates in eight of the last nine months. According to the Realtors Association, however, a certain bottom may now have been reached, as the monthly declines have slowed.

Economic Indicators August 25

MEZ Country Indicator Last period
08:00 GE GDP Q2 (q/q) +0.2%
08:45 FR Economic Indicator (August) 106.0
10:00 GE Ifo Business Climate (August) 88.6
13:30 EZ ECB Minutes
14:30 US GDP Q2 (q/q) -0.9%
14:30 US Consumer Spending Q2 (q/q) +1.0%
14:30 US Initial Jobless Claims (weekly) 250,000
15:00 US Start Jackson Hole Central Bank Symposium


Earnings Calender August 25

Country Company Period
GE Fielman H1
US Coty Q4


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