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LGT Navigator: Stock market recovery rally on thin ice

December 8, 2021

The recovery on stock markets continued, driven by an optimistic assessment of the economic impact caused by the Omicron virus variant. The resulting increase in investors' risk appetite led to a rally, particularly in the recently weaker technology stocks. In Asia, however, the momentum has already slowed down again, as the data situation regarding Omicron is still extremely thin and the mood on the stock markets could therefore quickly turn around again. Investors still need to keep an eye on the highly indebted Chinese real estate group Evergrande.

Stock market recovery rally on thin ice

On the Asian stock exchanges, the recovery rally initially continued in the middle of the week, but the momentum has already slowed noticeably. In Tokyo, the 225-strong Nikkei index is just under +1.5% higher and in Shanghai, the Composite index rose by a good +1%. In Hong Kong, however, the Hang Seng index is virtually unchanged from the previous day. On Wall Street, especially technology stocks were among the winners on Tuesday, and the shares of Apple reached a new record high. On the tech stock exchange Nasdaq, the indices rose by around +3%. Standard stocks also continued to climb, but the Dow Jones Industrial rose less strongly by +1.4% to 35'719.43 points and the broad S&P 500 rose by +2.07% to 4'686.75 points.

Japan's economy shrinks more than expected in Q3

Japan's economic output contracted more than previously expected in the third quarter due to weak private consumption and lower demand at home and abroad. Compared with the previous quarter, the world's third-largest gross domestic product fell by -3.6% on an annualized basis (first estimate -3%). Without annualization, GDP fell by -0.9% quarter-on-quarter.

Productivity slump in the US economy in the third quarter

Productivity, i.e. the ratio of output to hours worked, fell sharply in the US economy in the third quarter. On an annualized basis, a decline of -5.2% was measured – the sharpest slump since 1960! Meanwhile, unit labor costs rose by +9.6% on an annualized basis.

Tighter corona situation clouds economic expectations of German investors

Investors surveyed monthly by the Mannheim Center for Economic Research were more pessimistic in December than in the previous month. Although the expectations indicator fell less sharply than analysts had feared by 1.8 points to plus 29.9 points (consensus plus 25.4), the assessment of the current economic situation deteriorated by almost 20 points to minus 7.4 points, which is the first time since June that the index for the assessment of the current economic situation has been in negative territory. ZEW President Achim Wambach commented that the German economy is suffering noticeably from the new developments of the Corona pandemic and that the ongoing supply bottlenecks are weighing on production and retail trade. However, according to ZEW, inflation expectations have also declined sharply. The investors surveyed would now assume a decline in the inflation rate on a six-month horizon.

ECB should keep door open for rate hike before end of its net bond purchases

Austrian central bank chief and ECB Governing Council member Robert Holzmann argues that the European Central Bank should not link an interest rate hike to its bond-buying program, or rather keep the option of a rate hike open before the end of its net bond purchases. In the Handelsblatt, Holzmann said, “In the event of higher inflation, it could make sense in certain situations to raise interest rates already, but to continue to provide liquidity to the markets via the bond purchases.”

Economic Indicators December 8

MEZ Country Indicator Last period
00:50 JP GDP Q3 (q/q) -0.8%
16:00 CAN Bank of Canada monetary policy announcement +0.25%


Earnings Calender December 10

Country Company Period
GE Daimler Truck Initial Listing
UK Anglo American Investor Update


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