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LGT Navigator: No relief granted – focus on next Fed rate hike

September 16, 2022

Mixed economic data from the US could not provide any real new impetus and so the indices on the New York Stock Exchange fell again after the tentative stabilization on the previous day. The inflation trend and the reaction of the central banks remain dominant. Thus, capital markets focus already now on the interest rate decision of the Federal Reserve expected next Wednesday. The Fed could follow up in response to the more persistent than expected inflation in the US with another strong interest rate step – possibly with an increase of as much as 100 basis points.

No relief granted – focus on next Fed rate hike

While the Dow Jones industrial average exited the session at 30'961.82 points, down -0.56% for the day, the broad S&P 500 lost -1.13%, falling to 3'901.35 points. The strongest downward pressure was on the Nasdaq technology exchange, where the indices fell by about -1.7%, reaching the lowest level since mid-July. At the same time, US government bond yields rose ahead of next week's anticipated further interest rate move by the Federal Reserve. The yield on ten-year Treasuries climbed to 3.45%, while that on the two-year Treasury bond reached its highest level since 2007. Today, the upcoming big expiration on the futures markets could provide additional nervousness.

Stock exchanges in the Asia-Pacific region tend to close the week in negative territory. In Tokyo, the Nikkei 225 trades around -1.1% lower and in Hong Kong, the Hang Seng falls by around -0.5%. On the Chinese mainland, the indices in Shanghai and in Shenzhen fell by almost -1%. Better than expected data on Chinese industrial production and retail sales could not provide positive impetus. The MSCI index for Asia-Pacific equities outside Japan traded at the close around -1% lower than the previous day's close.

Fragile US retail sales

The American retail sector was able to increase its sales in August compared to the previous month more than expected. On a monthly basis, retail sales increased by +0.3%, while analysts had expected a decline of -0.1%. On the other hand, however, July sales were weak according to revised data, with a decline of -0.4% - an initial calculation had assumed stagnation.

Regionally mixed signals from US industry

Sentiment among industrial companies in the US state of New York improved significantly in September. This was indicated by the Empire State index, which rose by almost 30 points to minus 1.5 (consensus minus 12.9). In July, the barometer had reached minus 31.3 points, the lowest value since May 2020. In the Philadelphia region, the business climate in industry surprisingly deteriorated significantly. In the process, the Philly Fed index fell by 16.1 to minus 9.9 points (consensus plus 2.3).

Meanwhile, at the national level, US industry posted a sharper decline in industrial production than economists had expected. Month-on-month output fell -0.2% in August, while consensus had expected stagnation. Particularly, utilities have cut back production.

Moderately weakened momentum of German wholesale prices 

The strong rise in German wholesale prices weakened again in August. Wholesale prices increased by +18.9% year-on-year, marking the fourth month in which inflation in this segment has slowed. The background to the price increases is the sharp rise in prices for raw materials and intermediate products. Price developments in the wholesale sector generally have a delayed impact on consumer prices.

Slightly lower inflation in France

The cost of living in France decreased moderately in August. On an annual basis, consumer prices rose by +6.6% last month compared with +6.8% in July. A slight decline in energy prices was mainly responsible for the moderate easing in August, but food prices increased more significantly.

Economic Indicators September 16

MEZ Country Indicator Last period
08:00 UK Retail Sales (August, m/m) +0.3%
09:00 IT Consumer Prices (August, y/y) +9.0%
11:00 EZ Consumer Prices (August, m/m) +0.1%
11:00 EZ Consumer Prices (August, y/y) +9.1%
11:00 EZ Core Consumer Prices (August, y/y) +5.5%
13:00 UK Bank of England Quarterly Report
16:00 US Consumer Sentiment (September) 58.2


Earnings Calender September 19

Country Company Period
SZ Emmi Capital Market Day


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Source: LGT Bank (Switzerland) Ltd.


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