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LGT Navigator: Oil price rally fuels inflation concerns

October 12, 2021

The sustained rise in oil prices is intensifying fears of energy shortages and further fueling inflation concerns. As a result, the major stock indices were unable to hold initial gains at the beginning of the week. While there was no trading on the US bond market due to the “Columbus Day” holiday, oil prices continued their rally and European Brent crude oil reached around USD 84 per barrel. 

Oil price rally fuels inflation concerns

The Dow Jones Industrial lost -0.72% to start the week and exited Monday's trading at 34'496.06 points. The S&P 500 fell by -0.69% to 4'361.19 points and on the Nasdaq technology exchange, the indices fell by about -0.7%. Asian stock markets reported losses for the most part. At the center is the fear of a global energy crisis with uncontrolled inflation and a failed global economic recovery. New impetus is now hoped for from the quarterly reporting season in the United States, which begins tomorrow.

Annual meeting of IMF and World Bank

At the annual meeting of the International Monetary Fund (IMF) and the World Bank taking place in Washington, the focus will be on the corona crisis, inflation developments and the impact of global supply bottlenecks in the industry. The finance ministers and central bank heads will have to address the question of whether the increasing inflationary pressure is effectively only a temporary phenomenon and how the central banks should position themselves. Indeed, the focus will also be on inflation dynamics that are quite sustainable in nature. The IMF will also present its new forecasts for global economic growth at 3:00 p.m. (CEST) today. In view of the ongoing pandemic, a slight downgrade of the forecast is to be expected. In July, the IMF had still forecast global growth of +6% in the current year.

ECB chief economist Lane sees no reason to react to inflation at present

The chief economist of the European Central Bank (ECB), Philip Lane, emphasized that the ECB still expects medium-term inflation to remain low or within the range targeted by the central bank. For the end of the forecast horizon, the ECB currently expects an inflation rate of +1.5%. Should inflation remain permanently well above 2%, the ECB would be forced to act. But the central bank must avoid tightening its monetary policy too soon, Lane said at a meeting of the International Banking Federation (IIF). In September, inflation in the eurozone was +3.4%, reaching its highest level since 2008, driven by energy price developments and the consequences of material shortages. In December, the ECB will publish its new inflation forecasts, which extend into 2024.


Economic Indicators October 12

MEZ Country Indicator Last period
08:00 UK Unemployment Rate (August) 4.6%
11:00 GE ZEW Economic Outlook (October) +26.5
11:00 EZ ZEW Economic Outlook (October)  +31.1
15:00 US IWF Economic Forecast Global Economy


Earnings Calender October 12

Country Company Period
SZ Givaudan 9-Months Sales
SZ Lonza Investor Day
GE Munich Re ESG Day
FR LVMH Q3 Sales


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