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LGT Navigator: Stock market sentiment remains subdued

June 21, 2021

Stock markets are likely to continue their downward slide at the start of the week after the Federal Reserve adjusted its inflation and interest rate outlook at its meeting last Wednesday. Meanwhile, the ECB is extending exemptions for commercial banks to support them during the corona crisis.

Stocks drop

US stock markets ended the past trading week clearly in the red. On Friday, the S&P 500 lost -1.3%. The Dow Jones recorded a loss for the fifth day in a row and closed -1.6% lower at its lowest level since the beginning of April. The Nasdaq 100 technology index declined -0.8% after setting another record just above 14’200 points the previous day.

Among other things, statements by James Bullard, President of the Federal Reserve Bank of St. Louis, caused a subdued mood. He spoke out in favour of raising key interest rates as early as 2022, which would be significantly earlier than the Federal Reserve had envisaged last week. In addition, the big expiration day of options on indices and individual stocks on Friday caused price fluctuations.

The outlook for the new trading week remains gloomy. The Asian stock exchanges started Monday in deep red. In Tokyo, the Nikkei lost around -3.5% and in Hong Kong the Hang Seng lost -1.5%. The Shanghai Composite is -0.1% weaker after the Chinese central bank left key interest rates unchanged as expected.

The downtrend is also likely to continue on Wall Street: Futures on the major indices signal further losses on Monday.

ECB extends exemption rules for banks

European commercial banks are to continue to benefit from exemption rules to come through the corona crisis unscathed. Thus, the European Central Bank (ECB) has decided to continue the more generous calculation of the leverage ratio introduced last year for another nine months. The exemption rule was originally intended to last until the end of June. With the extension, banks will be able to make certain adjustments in the calculation of the leverage ratio in the coming months to achieve a better quota.

British consumers more cautious again

In Great Britain, retail sales surprisingly fell in May. Compared to the previous month, -1.4% less sales were recorded, while analysts had expected a plus of +1.5%. The food sector in particular saw sales drop by -5.7%. On an annual basis, of course, the picture looks different due to the base effect of the corona crisis. Compared to the same period last year, British retail sales rose by almost +25%. 

According to the Confederation of British Industries (CBI), the consumer behaviour of the British will be decisive in determining how quickly the gross domestic product (GDP) will return to its pre-crisis level. It predicts that the economy could recover from the setback as early as the end of 2021. Accordingly, economists expect GDP growth of +8.2% in the current year, followed by +6.1% next year. The pivotal point, however, is consumer behaviour. 

Economic Indicators June 21

MEZ Country Indicator Last period
14:30 US Fed Chicago National Activity Index (May>) +0.24


Earnings Calender June 23

Country Company Period
UK GlaxoSmithKline Investor Day
NL ASML Investor Day
US Johnson & Johnson  ESG Investor Update


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
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Source: LGT Bank (Switzerland) Ltd.

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