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LGT Navigator: Solid economic data provides positive impetus, at least in the short term

November 17, 2021

Better-than-expected economic data from the US gave investors reason for optimism. The latest data on sales in the American retail sector, for example, point to a solid propensity to consume and good pre-Christmas trading. However, latent inflation worries, and the renewed wave of pandemics are increasing uncertainty and jeopardizing stock market sentiment and the fragile economic recovery.

Solid economic data provides positive impetus, at least in the short term

Solid economic data created a good mood on the New York Stock Exchange, and particularly cyclically sensitive technology stocks benefited from the encouraging signs from US retail trading. On the Nasdaq, the indices rose by about +0.75%. In the broad market, however, the gains remained moderate: The S&P 500 closed +0.39% higher at 4'700.90 points and the Dow Jones Industrial exited Tuesday's trading at 36'142.22 points (+0.15%). The US indices were also supported by positive corporate news. For example, the home improvement chain Home Depot continued to benefit from the home improvement boom in the corona pandemic and exceeded expectations in profit and sales. The outlook of the largest US retailer Walmart, which expects a strong Christmas business and raised its profit forecasts after a good third quarter, was also convincing.

On Asian stock exchanges, however, dominated again an increased risk aversion of investors and most stock indices tended mostly in negative territory, but without a clear trend.

Americans already in a pre-Christmas shopping mood

The retail sector in the US saw a much stronger than expected increase in sales in October. Sales increased +1.7% month-on-month, while economists had consensus forecasts of a +1.4% increase. Sales have now risen for the third month in a row. One reason for the strong rise in retail sales could be early Christmas shopping, as consumers fear not being able to order certain products due to supply chain issues.

Rising infection figures increasingly jeopardize economic recovery, according to Ifo

The noticeable rise in Covid-19 infection figures is jeopardizing the economic recovery in Germany, according to the Munich-based economic research institute Ifo. “Particularly in the hospitality, travel, culture and events sectors, the spread of infections is causing economic activity to weaken as more and more people avoid infection risks,” Ifo head Clemens Fuest says. However, it is largely not lockdown measures that are causing economic costs, but the pandemic itself.

Eurozone economy to grow solidly in Q3 2021

Thanks to the easing of pandemic restrictions, gross domestic product in the euro countries expanded by a solid +2.2% in Q3 compared with the previous quarter, according to revised data from Eurostat, the statistics authority. This confirms an initial estimate made at the end of October. For the full year, GDP growth thus amounted to +3.7%. Against the backdrop of ongoing problems in global supply chains, burdening energy prices and the renewed wave of pandemics, economic growth is expected to be clearly weaker again in the final quarter of 2021.

Inflation in France and Italy continues upward trend

The cost of living in France increased by +3.2% year-on-year in October. As a result, the inflation rate in the second-largest economy in the eurozone reached its highest level in around 13 years. This was mainly due to higher prices for energy and services. In Italy, too, price pressure increased further in October. Consumer price inflation also rose by +3.2% year-on-year – the highest inflation rate in around nine years.

Economic Indicators November 17

MEZ Country Indicator Last period
08:00 UK Producer Prices (October, y/y) +6.7%
08:00 UK Consumer Prices (October, y/y) +3.1%
11:00 EZ Consumer Prices (October, y/y) +4.1%
11:00 EZ Core Consumer Prices (October, y/y) +2.1%
14:30 US Building Permits (October, m/m) -7.8%
14:30 US Housing Starts (October, m/m) -1.6%
19:30 EZ ECB President Lagarde 


Earnings Calender November 17

Country Company Period
US Cisco Systems Q1
US Target Q3
US Nvidia Q3


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Source: LGT Bank (Switzerland) Ltd.

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