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LGT Navigator: Stock markets start the new week with momentum thanks to positive economic data

November 16, 2020

In Asia, the majority of stock exchanges started the new trading week with solid gains, driven by stronger than expected economic data from Japan and China. Wall Street also saw a positive tone towards the end of last week. While stock market sentiment is generally supported by hopes for a rapid development of a Covid-19 vaccine, the rising infection numbers in the US and Europe, as well as the partially imposed lockdowns, are again causing more uncertainty for investors.

Stock markets start the new week with momentum thanks to positive economic data

In Asia, the stock markets started the new week with gains for the most part. In Tokyo, the Nikkei 225 index gained around +2% and at around 25 900 points recorded the highest level in 29 years! Previously, the latest data had shown that Japan's economy is on the road to recovery. In the third quarter, the gross domestic product expanded by +21.4%, thus exceeding market expectations (consensus +18.9%). The recovery was driven by private consumption and foreign demand. The world's third-largest economy thus recorded the strongest expansion since 1980 and the first increase in four quarters. Due to the corona pandemic, however, the Japanese economy will shrink by -5.6% in the current fiscal year (to March 2021) according to official forecasts. Positive economic data was also reported from China this morning. China's industrial production rose more strongly than expected after the corona-related slump in October, increasing by +6.9% year-on-year.

US equity indices ended the last of the US elections on a positive note. After a trading week dominated by hopes for a rapid vaccine development, the Dow Jones Industrial rose by +1.37% to 29 479.81 points on Friday, posting a weekly gain of a good +4%. The broad-based S&P 500 gained +1.34% at the end of last week, closing at 3 585.15 points.

Pressure on Trump increases and time is running out

The incumbent US president continues to use his lawyers to try to prove massive electoral fraud, but so far no large-scale electoral fraud or errors that could overturn the preliminary results have been proven. On Friday, Joe Biden also secured the electoral votes in Arizona and was able to extend his lead to 306 electoral votes. Trump has now reached 232 electoral votes. For the Democrats, winning Arizona is a sensation, because since 1952, no Democrat has been able to win this state, except for Bill Clinton in 1996. While various vote counting and recounts are still going on, the clock is ticking for Trump. On December 8 (Safe Harbor Deadline), the final results of the election are certified and proclaimed in Congress on January 6. At the latest then, the outcome of the election, at least legally, can no longer be disputed..

US consumer sentiment clouds over again

In its survey published on Friday, the University of Michigan noted a deterioration in consumer sentiment in the US. The Consumer Confidence index dropped to 77.0 points from 81.8 points in October. In view of the fact that the corona pandemic is still not under control, the private households surveyed were much more pessimistic about their prospects than before. More than 22 million jobs were lost in the US as a result of the corona pandemic, of which only around half have been created again so far. At the same time, the number of people infected with Covid-19 rose to over eleven million, and around 245 000 Americans did not survive the disease.

Republicans want to quickly confirm Trump's Fed candidate

Since the current majority of Republicans in the US Senate has not yet been secured, the two candidates nominated by the still incumbent President Donald Trump, Christopher Waller of the Fed in St. Louis and economic advisor Judy Shelton, are to be confirmed in the Senate this week. The Republicans still hold a majority of 53 of the 100 seats in the current legislative period, but the nomination of Shelton, a former campaign supporter of Trump, seems particularly controversial in the Republican ranks. Moreover, if the Democrats manage to secure the two Senate seats that are to be awarded in the runoff election in the state of Georgia in early January, Shelton's election would be highly questionable. Shelton is controversial because, like Trump, she strongly criticized Fed Chairman Powell and in the past has spoken out in favor of a return to the gold standard, among other things.

Euro economic recovery confirmed in Q3

The economy in the eurozone recovered from the corona shock in the third quarter and grew by +12.6% compared to the previous quarter (-11.8%). This means that the statistical office Eurostat has practically confirmed the previous and first estimate of +12.7%. This means that the euro countries recorded the strongest growth since records began in 1995. France's GDP grew most strongly in Q3, at +18.2%. In the meantime, economic prospects have deteriorated considerably again due to the second pandemic wave and renewed lockdowns.



Economic Indicators November 16

MEZ Country Indicator Last
14:30 US New York Fed Empire State Manufacturing Index (November) +10.5

Earnings Calendar November 16

Country Corporate Period
SZ Sonova H1
UK Vodafone H1


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