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LGT Navigator: Technology stocks sell-off weighs heavily on investor sentiment

May 10, 2022

The recent rise in interest rates and growing fears that the central banks' increasingly restrictive monetary policy and ongoing supply chain problems against the backdrop of China's zero-Covid policy are jeopardizing global economic growth are weighing heavily on technology stocks in particular and depressing stock market sentiment. The yield on ten-year US government bonds climbed to 3.2% in the meantime, reaching its highest level since November 2018.

Technology stocks sell-off weighs heavily on investor sentiment

At the beginning of the week, there was another sell-off on the Nasdaq technology exchange. The indices slumped by around -4% and fell to the lowest level since November 2020. But also, the standard stocks came under pressure on Monday. Thus, the Dow Jones Industrial closed almost -2% lower at 32'245.70 points and the broad S&P 500 gave up -3.2% to 3'991.24 points. Meanwhile, yields on the bond market eased slightly again, with the yield on ten-year US government bonds falling to 3.0%.

In Asia, too, the interest rate and economic concerns caused lower share prices. In Tokyo, the Nikkei 225 fell at times by -1.8% and the most important company in Shanghai and Shenzen, the CSI 300, lost at times around -1.5%. 

Investors' economic assessment worsened according to Sentix

The outlook for economic development in Germany and the eurozone deteriorated for the third month in a row in May. This is indicated by the latest survey results of the German financial market analysis company Sentix. The economic indicator fell from minus 18 to minus 22.6 points and thus reached its lowest level since mid-2020, primarily due to the war in Ukraine with all its negative repercussions, but also to the global supply chain problems, which have been further exacerbated by the lockdowns in China, and not least the more restrictive monetary policy stance of the major central banks.

China's export growth falls to lowest level in two years

Chinese exports fell by just under -4% in April compared with the same period last year. This means that the pace of growth of China's exports has slowed to the fastest since June 2020. At the same time, imports are stagnating. China exported just under +8% more to the European Union in March than in the same period of the previous year. At the same time, however, imports from the EU to the People's Republic slumped by around -12%. Overall, foreign trade accounts for around one third of China's economic output. China's foreign trade is being held back in particular by the strict pandemic measures. However, despite the high economic costs, the Chinese leadership intends to stick to its zero-tolerance policy.

Economic Indicators May 10

MEZ Country Indicator Last period
10:00 IT Industrial Production (March, y/y) +3.3%
11:00 GE ZEW Economic Expectations (May) -41.0
16:00 GE Bundesbank President Nagel speaks
19:20 EZ ECB Vice President De Guindos speaks

 

Earnings Calender May 10

Country Company Period
JP Sony Q4
SZ Alcon Q1
GE Bayer Q1 
GE Munich Re Q1
GE Porsche Automobil Holding Q1
GE Fraport Q1
FR Renault Capital Markets Day
IT Pirelli Q1
ES Endesa Q1
US Hyatt Q1
US Electronic Arts Q4

 

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

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