Skip navigation Scroll to top
Scroll to top

LGT Navigator: Nervousness remains tangible

March 26, 2020

The agreement in Washington on trillions of dollars in financial aid and the promises made by central banks and governments of practically unlimited economic stimulus packages to stem the negative effects of the corona crisis on the global economy initially led to an impressive recovery on the international stock markets. However, due to the continuing high level of uncertainty about the extent and consequences of the pandemic, the nervousness of stock market players and investors remains noticeable. In Asia, the recovery rally has already dried up again and investors' risk aversion has again taken the upper hand, which has once more put the stock market indices, particularly in Tokyo, under strong pressure.

Nervousness remains tangible

The 225-stock Nikkei index recorded a daily loss of around -4.5% shortly before the close of trading − but this was after the Japanese benchmark had posted its highest daily gain in eleven years the previous day. The fact that Singapore's economy collapsed in the first quarter, which is not a good omen for the rest of Asia, also contributed to risk aversion.  The futures markets also point to a negative opening on Europe's exchanges. A speech by US Federal Reserve Chairman Jerome Powell is also eagerly awaited today, especially his assessment of the severe economic damage to be expected from the coronavirus pandemic. Meanwhile, the majority leader in the House of Representatives, Chuck Schumer, emphasized that Congress will have to decide on additional crisis management steps in the coming weeks, even after the two trillion-dollar aid package that has just been passed.

Current labour market data eagerly awaited

According to James Bullard, President of the St. Louis Fed, the consequences of the corona crisis could cost up to 50 million jobs in the US in the short term. The two trillion-dollar aid package adopted by the US Congress to tackle the crisis has the appropriate weight to counteract the economic damage, said Bullard. It will be interesting to watch the weekly labour market data that will be released today at 13:30 (CET). This data may give a first impression of how deep the pandemic has already hit the job market. The highest level of initial applications for unemployment benefits to date was 680 000 in September 1982. Economists' estimate that about one million applications were made last week. Some forecasts even expect up to four million initial applications. On Friday a week from now, April 3, the official monthly statistics from the labour market will be available.

Little meaning of ”hard” US economic data

Durable goods orders reported yesterday from U.S. industry rose by a surprising +1.2% in February versus the previous month. Given that the coronavirus pandemic has taken some time to arrive in the United States, this hard data – i.e. effectively booked figures and not just survey data – is unlikely to truly reflect corporate uncertainty in this regard yet. However, analysts had already anticipated a decline of -0.9%. However, orders for civil capital goods (excluding military equipment and aircraft) were already down -0.8% month-on-month in February. This component is regarded as an indicator for the investment activity of companies.

Ifo: German economy is in shock

With the sharpest decline in the survey history and the lowest value since mid-2009, the business climate index of the Ifo Economic Research Institute highlights the uncertainty among the approximately 9 000 companies surveyed. The important economic barometer fell to 86.1 points in March, down from 96.0 points in February. A preliminary assessment published last week in an extraordinary manner had revealed a slightly higher value of 87.7 points. In view of the pandemic, the German economy is in shock and a severe recession must be expected due to the measures taken, or rather a collapse of the gross domestic product by five to 20%. The virus crisis will cause production losses amounting to hundreds of billions of euros and put a considerable strain on the labour market as well as the national budget, the Munich-based economic research institute commented.

Calls for ”corona bonds” are getting louder

Nine EU countries, including the heavyweights and countries severely affected by the corona crisis, such as Italy and Spain, but also France (as well as Portugal, Greece, Ireland, Belgium, Luxembourg and Slovenia), are calling for a ”common debt instrument” in view of the expected serious negative consequences of the pandemic. Yesterday, the heads of state and government of the nine countries met and discussed the possibility of joint debt instruments to be issued by a European institution. These should be ”of sufficient size and maturity“. Today the EU heads of state and government want to meet again via video conference to discuss the coronavirus.

SNB takes further measures to safeguard liquidity

The Swiss National Bank (SNB), in its fight against the effects of the corona crisis, has announced that it will make an unlimited refinancing facility available to commercial banks in order to provide the banking system with further liquidity if required. In addition, the SNB wants to reduce or suspend the countercyclical capital buffer for banks to zero percent with immediate effect. "In order to overcome this crisis, it is essential to supply the banking system with liquidity and loans for companies", the SNB explained its measures, which have been coordinated with the Financial Market Authority Finma.



Economic Indicators March 26

MEZ Country Indicator Last
08:00 GE GfK Consumer Climate Index  +9.8
08:45 FR Business Climate Index 105.4
10:30 UK Retail Sales (y/y) +0.8%
13:00 UK Bank of England Monetary Policy Decsion +0.1%
13:30 US GDP Q4 annualized (revision, q/q) +2.1%
13:30 US Personal Consumption Q4 (revision, q/q) +1.7%
13:30 US Core Personal Consumption Q4 (revision, q/q) +1.2%

Earnings Calendar March 30

Country Corporate Period
GE Stroeer Y19



LGT helps you make informed investment decisions

All about global economic and market trends at a glance

Subscribe to LGT's research newsletters

Follow us on TwitterFacebook or LinkedIn, where we inform you about latest market developments and LGT News. Further informationen is available on: LGT Social Media.

Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail:
Source: LGT Bank (Switzerland) Ltd.

Risk Disclosure (Disclaimer)
This publication is an advertising material / marketing communication. This publication is for your information only and is not intended as an offer, solicitation of an offer, or public advertisement to buy or sell any investment or other specific product. Its content has been prepared by our staff and is based on sources of information we consider to be reliable. However, we cannot provide any confirmation or guarantee as to its being correct, complete and up to date. The circumstances and principles to which the information contained in this publication relates may change at any time. Information that has been published should therefore not be understood as implying that no change has taken place since its publication or that it is still up to date. The information in this publication does not constitute an aid for decision-making in relation to financial, legal, tax-related or other consulting matters, nor should any investment decisions or other decisions be made on the basis of this information alone. It is recommended that advice be obtained from a qualified expert. Investors should be aware that the value of investments can fall as well as rise. Positive performance in the past is therefore no guarantee of positive performance in the future. Investments in foreign currencies are also subject to fluctuations in exchange rates. We disclaim all liability for any loss or damage of any kind, whether direct, indirect or consequential, which may be incurred through the use of this publication. This publication is not intended for persons subject to legislation that prohibits its distribution or makes its distribution contingent upon an approval. Any person coming into possession of this publication shall therefore be obliged to find out about any restrictions that may apply and to comply with them. In line with internal guidelines, persons responsible for compiling this report are free to buy hold and sell the securities referred to in this report.

US employment growth remains dynamic at the beginning of the year