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LGT Navigator: Ongoing interest rate worries weigh, while easing in China provides relief

December 7, 2022

The prospect of a further sharp increase in key interest rates in the US against the backdrop of stronger-than-expected economic data caused continued pressure on Wall Street, especially on interest rate-sensitive technology stocks. In Asia, however, stock markets benefited from China's announcement of further partial easing of its strict zero-covid measures.

Ongoing interest rate worries weigh, while easing in China provides relief

In New York, the Dow Jones Industrial declined by -1.03% and went out at 33,596.34 points. The S&P 500 closed at 3,941.26 points, losing -1.44% from the previous day's close. The most under pressure yesterday were technology stocks such as Meta, Apple and Amazon. The Nasdaq indices fell by about -2%. After Fed Chairman Jerome Powell recently signaled a more moderate pace regarding interest rate increases, the latest economic data - especially from the American labour market – indicate that the Fed must continue to raise interest rates sharply to moderate inflation. The Fed's final interest rate decision on December 14 is therefore eagerly awaited. Meanwhile, the yield on the ten-year US government bond is trading around 3.5%.

In the Asia-Pacific region, the stock indices initially rose for the most part on Wednesday morning after China announced a further easing of the strict pandemic measures. By the close of the stock market, however, the indices fell sharply and thus still followed the negative guidance from the US stocks. The mood was also dampened by weak data on China's foreign trade. Weak global demand and the Corona lockdowns in China caused Chinese exports to slump by -8.7% (in US dollars) in November compared with the same month last year. It was the second consecutive monthly decline. Imports fell by -10.6%, also much more sharply than forecast.

ECB chief economist: Euro area inflation should have almost peaked

Philip Lane, chief economist of the European Central Bank (ECB), expressed confidence that inflation in the euro zone is approaching its peak. At present, however, it is still uncertain whether the peak has already been reached or will not be reached until early 2023. In October, the inflation rate had reached a record high of 10.6% and then declined to 10.0% in November. The ECB's next policy decision on December 15 is now eagerly awaited. Most recently, the ECB had stepped up its fight against inflation with sharp interest rate hikes of 75 basis points. According to the ECB's chief economist, further interest rate hikes will follow, but the extent of the previous interest rate steps must now also be considered.

Another sensitive defeat for Trump

In the US state of Georgia, Democratic Senator Raphael Warnock prevailed in the runoff election against Republican challenger Herschel Walker. The Democrats thus expand their razor-thin majority in the US Senate to 51 seats almost a month after the congressional elections. Walker received strong support from former President Trump, making him another Trump candidate who lost.


Economic Indicators December 7

CET Country Indicator Last period
07:45 SZ Unemployment Rate (November) 2.1%
08:00 GE Industrial Production (October, M/M) +0.6%
11:00 EZ GDP Q3 (q/q) +0.2%
14.30 US Non-Farm Productivity Q3 (q/q) +0.3%
14:30 US Unit Labor Cost Q3 (q/q) +3.5%

Earnings Calender December 8

Country Company Period
UK British American Tobacco  Q4 Sales
US General Electric (Investor Day)
US Broadcom Q4
US Costco Wholesale  Q1


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