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LGT Navigator: Rising yields push stock markets back on the defensive

March 31, 2021

While at the beginning of the week the turbulence surrounding the hedge fund Archegos threatened to tip the mood on stock markets, investors remained mostly optimistic and based their hopes on the Covid-19 vaccination campaign, which is making rapid progress at least in the US, and the anticipated infrastructure program of US President Biden. However, a renewed rise in yields on the Treasury market is now once again clouding stock market sentiment, and particularly among technology stocks.

Rising yields push stock markets back on the defensive

The Dow Jones Industrial closed on Tuesday -0.31% lower at 33'066.96 points, after the leading index had reached a record high of 33'259 points at the start of the week. The market-wide S&P 500 also fell by -0.32% to 3'958.55 points. Investors looked again increasingly to the rising yields on the US bond market. The yield on ten-year US government bonds is now clearly above 1.70% again. While financial stocks were able to recover from the turbulence surrounding the hedge fund Archegos, technology stocks suffered from the higher interest rates. Thus, the Nasdaq 100 ended Tuesday's trading with a daily loss of -0.53% at 12'896.53 points.

In Asia, most stock indices joined the negative guidance from Wall Street on Wednesday morning and trended in the red. Strong economic data from China failed to provide any positive impetus. According to the latest purchasing managers survey values, the mood in China's economy has brightened surprisingly significantly in March. The purchasing managers' index for industry improved from 50.6 in the previous month to 51.9 points. And the mood in the service sector also brightened unexpectedly significantly. The corresponding PMI rose from 51.4 to 56.3 points.

IMF expects further acceleration of the global economy

The International Monetary Fund (IMF) will adjust its forecasts for the global economy upward, according to IMF chief Kristalina Georgieva. Despite the ongoing corona pandemic, further acceleration is expected this year and next, she said. The ongoing vaccination campaign and the massive fiscal packages in the US are providing optimism. At the beginning of the year, the Monetary Fund's forecast for global GDP growth was +5.5%.

More confident US consumers 

The mood of Americans unexpectedly brightened significantly in March, as shown by the latest survey data from the economic research institute The Conference Board. The consumer confidence barometer rose from 90.4 to 109.7 points (consensus 96.8) and is now at its highest level since the outbreak of the pandemic. A total of 5'000 households were surveyed as part of the poll.

Economic sentiment in the eurozone brightens strongly in March

For the first time since the outbreak of the corona crisis, the indicator compiled monthly by the European Commission for assessing economic developments is slightly above the long-term average. The composite index rose from 93.4 points in February to 101.1 points in March, while analysts had expected an improvement to 96.0 points. The gains were of a magnitude not seen since the steep recovery after the first phase of the pandemic, the Brussels executive stressed. The mood had brightened most in Germany. But economic sentiment had also improved significantly in the other major euro countries.

The latest survey results from Paris are also optimistic. The mood of French consumers improved surprisingly significantly in March. The indicator, which is compiled by the statistics office Insee, climbed by 3 points to 94 points compared with the previous month. Previously, consumer sentiment had fallen for two months in a row.

KOF economic barometer signals swift economic recovery

The Swiss economy appears to be on track for a strong recovery in the coming months. At least that is what the economic barometer published yesterday by the Swiss Federal Institute of Technology's (ETH) economic research center in Zurich suggests. In March, the indicator climbed by 15.2 points compared with the previous month to 117.8 points, thus reaching its highest level since summer 2010. The recovery is being driven primarily by industry. However, the other sectors as well as domestic and foreign demand are also signaling a positive trend, albeit weaker than in the industrial sector, commented the KOF.

Strong rise in inflation in Spain

In Spain, the rate of consumer price inflation rose sharply in March. Consumer prices surveyed according to the European method rose by +1.2% over the year. At the beginning of the year, the inflation rate was still just in negative territory. On average, analysts had expected a slightly lower inflation rate of +0.9%. On a monthly basis, consumer prices rose by 1.9% in March (consensus +1.6%).


Economic Indicators March 31

MEZ Country Indicator Last
08:45 FR Consumer Spending (February, m/m) -4.6%
08:45 FR Consumer Prices (March, y/y) +0.8%
09:55 GE Unemployment Rate (March) 6.0%
11:00 EZ Consumer Prices (March, y/y) +0.9%
11:00 EZ Core Consumer Prices (March, y/y) +1.1%
12:00 IT Consumer Prices (March, y/y) +1.0%
14:15 US ADP Employment Growth Private Sector (March) +117,000
15:45 US Chicago PMI (March) 59.5
16:00 US Pending Home Sales (February, m/m) -2.8%
16:00 US SNB Quarterly Report

Earnings Calender March 31

Country Corporate Period
US Walgreens Boots Alliance Q2


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