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LGT Navigator: Stock markets defy weak economic signals

August 17, 2022

Despite weak US economic data, the recovery rally on the New York Stock Exchange continued, driven by good quarterly reports and outlooks from Walmart and Home Depot. In Europe, meanwhile, economic expectations among German financial experts deteriorated again according to the Mannheim-based ZEW research institute, and the sentiment barometer fell to its lowest level since October 2008.

Stock markets defy weak economic signals

The Dow Jones Industrial climbed on Tuesday above the mark of 34,000 points and closed at 34,152.01 points +0.71% higher than the previous day. The broad S&P 500 went out with a daily gain of +0.19% at 4,305.20 points. Support was provided by Home Depot, which reported a record quarter and the world's largest retailer Walmart, which increased sales in the reporting quarter and was more optimistic in the annual outlook. On the Nasdaq, however, the indices posted a decline of about -0.25%. In the US bond market, the yield of ten-year Treasuries stands at 2.81%, slightly higher than the previous day.

In the Asia-Pacific region, trading on the stock markets was inconsistent at midweek. In Hong Kong, the Hang Seng rises by around +0.8% and in Shanghai, the Composite Index rose by around +0.3%. Japan's Nikkei 225 goes about +1% higher out of the day's business, after Japan was reported for July with +19% export growth compared to the same month last year, which was above expectations. The backdrop is the strong recovery in auto exports.

New Zealand's central bank tightens monetary policy reins further

The central bank of New Zealand attracted attention today by raising its key interest rate by a further half percentage point to 3.0%. In its outlook, the Reserve Bank of New Zealand assumes an increase of another 100 basis points to get inflation under control.

Negative signals from the US housing market

In the US, the number of housing starts fell surprisingly sharply in July. Compared with the previous month, housing starts fell by -9.6%, while analysts had expected a decline of 2.1%. At the same time, building permits, which are a key indicator of future construction activity, also fell by -1.3%, although a more pronounced decline of -3.3% had been expected. The background to this is the rise in mortgage interest rates and increased construction costs due to a shortage of materials and labor.

Inflation causes economic pessimism among financial professionals according to ZEW

The outlook for the German economy has deteriorated significantly, according to the latest survey results from the Mannheim Center for European Economic Research (ZEW). The current economic barometer fell from minus 53.5 to minus 55.3 points in August, thus reaching its lowest level since October 2008. Analysts, on the other hand, had expected an increase to minus 52.7 points. The continuing strong increase in the cost of living and the expected additional costs for heating and electricity are weighing on the outlook for the consumer-related sectors of the economy in Germany, the ZEW commented. The assessment of financial analysts and investors surveyed for the euro zone was analogous. The corresponding indicator fell by 3.8 points to minus 54.9 points.

Trade deficit of euro countries widens again

Increased imports and weakening exports caused the trade deficit in the euro zone to widen more sharply than expected in June. Seasonally adjusted, the deficit widened again to EUR 30.8 billion, a difference of EUR 3.6 billion from the previous month and closer again to the record deficit of EUR 32.3 billion recorded in April. Economists had forecast a decline in the deficit to EUR 22.0 billion. The background to this is not least the sharp rise in energy imports because of the Ukraine war and higher energy prices.


Economic Indicators August 17

MEZ Country Indicator Last period
08:00 UK Consumer Prices (June, y/y) +9.4%
08:00 UK Producer Prices (June, y/y) +16.5%
11:00 EZ GDP Q2 (q/q) +0.7%
14:30 US Retail Sales (July, m/m) +1.0%
20:00 US FOMC Minutes


Earnings Calender August 17

Country Company Period
SZ Swiss Life H1
SZ Tecan H1
DK Carlsberg H1
US Cisco Systems Q4
US Target Q2


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