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LGT Navigator: Successful start to the year on thin ice

January 4, 2022

At the beginning of the year, investors on the international stock markets were in a good mood. On the first trading day of 2022, the indices in Europe, the US and Asia posted mostly gains. However, trading was still characterized by thin volumes and erratic movements. This is because stock markets are skating on thin ice and the known uncertainty factors, such as pandemic and inflation, are likely to continue to weigh on sentiment and cloud the outlook for the global economy.

Successful start to the year on thin ice

On the New York Stock Exchange, the Dow Jones Industrial gained +0.7% on Monday and closed just below the daily high. The broad S&P 500 was also up, following the record highs reached last Thursday. The strongest gains were seen on the Nasdaq technology exchange, where indices rose more than one percent. Apple's shares reached a stock market value of more than three trillion US dollars for the first time.

In Asia, the picture today was mixed. While the stock indices in Tokyo joined the positive guidance from overseas, Hong Kong, for example, struggled after China's cybersecurity regulator announced tighter rules for overseas listings. Less attention was paid to positive economic news from China. For example, sentiment in Chinese industry brightened at the end of the year. This was signaled by the Purchasing Managers' Index (PMI) published this morning by the Chinese business magazine Caixin. The PMI improved in December from 49.9 points in November to 50.9 points, reaching the highest level in half a year.

Industry in the US and Europe more pessimistic

In the US industrial sector, activity slowed in December compared with the previous month. The Purchasing Managers' Index of the London-based research institute IHS Markit slipped to 57.7 points from 58.3 points in November. According to IHS Markit, delivery delays and material bottlenecks continue to be responsible for the more pessimistic assessment of the companies surveyed. Sentiment in the industrial sector also remained clouded in the eurozone, given the ongoing disruption to global supply chains and heightened uncertainties caused by the omicron variant at the end of last year. This was signaled by the IHS Markit Purchasing Managers Index released yesterday. At 58.0 points, the PMI was down 0.4 points from the previous month.

Inflation in Turkey out of control

In Turkey, consumer price inflation is getting more and more out of control. In December, for example, the inflation rate reached 36%, the highest level in around 20 years. Since mid-2021, the annual inflation rate has more than doubled and on a month-on-month basis, the cost of living increased by almost +14% at the end of last year. Inflation in Turkey is likely to remain “hot” in the coming months as well. This is also indicated, for example, by the massive increase in producer prices, which rose by almost +80% year-on-year in December. Contrary to this, the Turkish central bank had cut interest rates under political pressure, thus also exacerbating the collapse of the Turkish lira.

Economic Indicators January 4

MEZ Country Indicator Last period
08:00 GE Retail Sales (November, m/m) -0.3%
08:30 SZ Consumer Prices (December, y/y) +1.5%
08:45 IT Consumer Prices (December, y/y) +3.4%
09:55 GE Unemplomyent Rate (December) 5.3%
10:30 UK PMI Manufacturing (December) 58.1
16:00 US ISM PMI Manufacturing (December) 61.1

 

Earnings Calender January 5

Country Company Period
US Computer Technology Association (CES) Event in Las Vegas

 

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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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