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LGT Navigator: PMIs signal ongoing recovery in the industry

September 2, 2020

Leading indicators in the form of the monthly purchasing managers' surveys confirmed the hope for a further recovery of the industrial sectors in the US and the eurozone. Positive economic news provided new fuel for the record hunt on Wall Street. In Europe, on the other hand, the euro, which is becoming ever stronger due to the greenback's weakness, is slowly but surely putting pressure on the export prospects of European companies. 

PMIs signal ongoing recovery in the industry

The ISM purchasing managers' index (PMI) for the American industrial sector, which is highly regarded due to its strong correlation with overall economic growth, signaled even stronger momentum. According to the Institute for Supply Management, the PMI improved from 54.2 points in the previous month to 56.0 points in August, its highest level since January 2019, thus indicating a solid growth trend. On average, analysts had forecast a somewhat more moderate brightening to 55.0 points. Among the companies surveyed, the number of new orders, employment and production improved in August.

Record series on Wall Street continues

With the tailwind of economic data, the Dow Jones Industrial and the S&P 500 rose by +0.76% to 28 645.66 and by +0.75% to 3 526.65 points – in the case of the S&P 500, a new record level. The record series also continued on the Nasdaq technology exchange. The Nasdaq 100 rose by +1.5% to 12 292.86 points. In Asia, on the other hand, a more cautious stance dominated and no clear trend could be observed. In Tokyo, the Nikkei index traded +0.45% higher. At the same time, the MSCI index for Asian stocks (excluding Japan) rose more than +1%. For Europe, the futures markets signaled a friendly opening of the stock markets in the middle of the week. In addition to the latest data from the US labor market, investors will be eagerly awaiting the Federal Reserve's regular economic report, the so-called Beige Book, this evening.

Eurozone industry remains on growth path

The recovery after the end of the corona-related lockdown seems to have taken hold in the eurozone industry. Although the Purchasing Managers' Index (PMI) compiled by the London-based IHS Markit Institute fell slightly by 0.1 to 51.7 points in August, this confirmed the moderate growth trend. How sustainable the upswing really is, will become apparent in the coming months, commented IHS Markit chief economist Chris Williamson. Especially in Germany, the industry continued to gain ground in the last months thanks to catch-up effects. The German PMI improved by 1.2 to 52.2 points ­the best value in almost two years. However, IHS Markit emphasized that the mechanical and plant engineering sector is still suffering from the low willingness to invest.

Negative inflation in the Eurozone for the first time since 2016

According to Eurostat, consumer prices in the euro countries fell by -0.2% in August compared with the same period of the previous year. This was the first negative inflation rate since 2016. The decline was also -0.4% on a monthly basis. In the core rate, i.e. excluding energy and food prices, which are often subject to fluctuations, consumer prices fell by -0.5% in August, compared with the previous month and by -0.4% year-on-year. Energy cost -7.8% less than in August 2019.

Industry has also recovered noticeably in the UK

As in the euro area, the mood in the British industrial sector also continued to brighten in August, clearly setting itself apart from the lows at the height of the corona crisis. The IHS Markit purchasing managers' index climbed from 53.3 points in July to 55.2 points. In April, the activity barometer had plunged to a record low of 32.6 points due to the lockdown.



Economic Indicators September 2nd

MEZ Country Indicator Last
11:00 EZ Producer Prices (July, y/y) -3.7%
14:15 US ADP Employment Report (August) +167,000
16:00 US Factory Orders (July) +6.2%
20:00 US Fed Beige Book

Earnings Calendar September 3

Country Corporate Period
SZ Kaba Holding Full Year


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