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LGT Navigator: Stock markets take a breath

February 11, 2021

After the recent record chase, stock markets are trying to consolidate the higher valuation level. The main focus remains on the anticipated corona stimulus package in the US and the longer-term expansive orientation of central banks. Federal Reserve Chairman Powell reiterated that the economy needs further assistance in view of the corona crisis. While inflation expectations on financial markets have been rising for some time in view of the anticipated further expansion of fiscal policy measures to contain the economic impact of the pandemic, the current inflation rate in the US remained moderate at the beginning of the year.

Stock markets take a breath

On Wall Street, the indices trended more or less sideways in midweek, with new highs again being recorded in some cases at the start of trading. The Dow Jones Industrial closed with a daily gain of +0.2% at 31'437.80 points, while the market-wide S&P 500 declined by -0.03% to 3'909.88 points and the technology stock index Nasdaq 100 by -0.23% to 13'655.27 points. On the corporate side, the quarterly figures of Coca-Cola, among others, made headlines in the pre-market after the beverage company exceeded analysts' expectations with its earnings per share. Meanwhile, Federal Reserve Chairman Jerome Powell maintained in a speech to the Economic Club of New York that the labor market is still far from a full recovery. Powell stressed that it will take more than supportive monetary policy to achieve and sustain maximum employment.

In Asia, stock trading was quiet on Thursday due to holidays in Japan, Korea and China. For European stock markets, futures signal a friendly start. In addition to some corporate results, the latest economic forecasts of the EU Commission (11:00 CET), among other things, are in focus today. In November, the EU Commission had forecasted that the euro economy would grow +4.2% in 2021.

US inflation rate unchanged in January, but inflation expectations rise

While analysts had expected a rise in US consumer price inflation on a year-over-year basis, the inflation rate in January remained unchanged at +1.4% from the previous month. On a monthly basis, consumer prices rose by +0.3%. Excluding energy and food prices, which are often susceptible to fluctuations, the inflation rate actually declined to +1.4% in January from +1.6% in December. On the other hand, the billion-euro stimulus package expected on financial markets from the new administration under President Joe Biden is causing inflation expectations to rise. So far, however, the Fed has not (yet) shown any concern in this regard.

Inflation rate in Germany picks up at the beginning of the year

In Germany, consumer prices rose more strongly than expected in January. Compared with the same period a year earlier, the inflation rate increased +1.0%, or +1.6% on an EU harmonized basis. In December, consumer prices had fallen by -0.3% year-on-year. The Federal Statistical Office explained that the reduction in value added tax for a limited period of six months in mid-2020 had had a price-driving effect.

Ifo expects renewed dampener for Germany's economy due to lockdown

The Munich-based economic research institute Ifo believes that the renewed restrictions on public life to contain the corona pandemic will provide another damper on the German economy. According to the Ifo Institute's calculations, the closure of consumer-related service sectors could push German gross domestic product down by almost another percentage point in the first quarter of 2021. However, as the industrial and construction sectors continue to perform well, gross domestic product is likely to stagnate rather than decline at the start of the year, Ifo commented.

 

Economic Indicators February 11

MEZ Country Indicator Last
00:00 CN Holiday
00:00 JP Holiday
11:00 EZ EU Comission Economic Forecastst
14:30 US Initial Jobless Claims (weekly) +779,000
20:00 US Fed Semi-annual Monetary Policy Report to the Senate

Earnings Calendar February 11

Country Corporate Period
SZ Zurich Insurance Q4
SZ Clariant Q4
FR L'Oréal Q4
FR Schneider Electric Q4
UK AstraZeneca Q4
US Walt Disney Q4
US PepsiCo Q4

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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US employment growth remains dynamic at the beginning of the year