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LGT Navigator: Technology stocks under pressure again – SNB interest rate decision in focus

March 25, 2021

The stock markets initially received support in midweek from further declining US government bond yields and encouraging sentiment data from manufacturing and the service sector in the US and Europe. The billions in investments announced by technology giant Intel provided a boost for shares in the semiconductor sector. Until the close of the stock market, however, the gains could not be defended and particularly the technology stocks on Wall Street ended Wednesday in the red. Today, among other things, the interest rate decision of the SNB will be in the investors’ focus.

Technology stocks under pressure again – SNB interest rate decision in focus

The US stock indices could not defend their initial gains in midweek. The Dow Jones declined successively in the last two trading hours and closed virtually unchanged at 32'420.06 points (-0.01%). The market-wide S&P 500 fell by -0.55% to 3'889.14 points. More significant were the losses yesterday on the technology exchange Nasdaq. The Nasdaq 100 collapsed until market close by -1.68% to 12'798.88 points. Initially, the news that Intel amid the global semiconductor shortage wants to greatly expand its production capacity and will invest about USD 20bn for this, provided positive impetus, but could not sustainably influence the general mood.

In Asia today, no consistent trend was observed and most stock indices trade between gains and losses today. Chinese technology stocks were under pressure. The background is the intention of the US Securities and Exchange Commission to take new measures to exclude foreign companies from US stock exchanges if they do not comply with US auditing standards and disclose any government connections. This could hit particularly Chinese companies. In Tokyo, however, the 225-traded Nikkei index is trading up a solid +1% for the day. For Europe's stock markets, futures are signaling a negative start to trading. Today, the heads of state and government of the EU countries will discuss the corona figures, which are rising sharply again, and the vaccination strategy in a video conference. In particular, the focus will be on accelerating the production and delivery of vaccines, which have been in short supply so far.

SNB interest rate decision in focus

The quarterly monetary policy assessment of the Swiss National Bank (SNB) starting at 09:30 (CET) will also be followed with interest. An adjustment of the key interest rates is not expected. However, the SNB's assessment of the further development of the economy against the backdrop of the third wave of the pandemic will certainly be eagerly awaited.

Biden's first press conference

US President Joe Biden will take questions from journalists at his first formal press conference today at 6:15 p.m. (CET). The focus will be on the corona pandemic, the Covid-19 vaccination strategy, economic development and also the hot domestic issue of migration at the southern border with Mexico.

US economy remains on solid growth path in March

Companies in the US private sector, surveyed monthly by London-based IHS Markit, remained confident in March. Although the Purchasing Managers' Index for the private sector with industry and services fell from 59.5 points in February to 59.1 points in March, the economic barometer still signals a solid growth path for the world's largest economy. According to IHS Markit Chief Economist Chris Williamson, the vaccine campaign and the massive economic stimulus program provided a strong boost to demand in the US economy.

Significantly improved business sentiment in the eurozone

IHS Markit's composite purchasing managers' index (PMI Composite) signaled growth in the eurozone for the first time in six months, rising 3.7 points in March to 52.5. Analysts had forecast only a moderate improvement to 49.1 points. While the ongoing pandemic continues to weigh most heavily on the service sector, manufacturing in the eurozone is currently in extremely solid shape. The Purchasing Managers' Index for the industrial sector climbed unexpectedly strongly from 57.9 points in February to 62.4 in March (consensus 57.6), thus reaching its highest level since the start of the data series in 1997. At the same time, the index for the services sector improved from 45.7 to 48.8 points, but remains below the 50-points growth threshold. However, in view of the renewed rise in Covid-19 case numbers and renewed lockdowns, the outlook has deteriorated and a “two-speed economy” is still to be expected for some months to come, commented IHS Markit Chief Economist Williamson.

In the UK, sentiment among firms surveyed by IHS Markit also brightened significantly in March. The Purchasing Managers' Index for the private sector improved by 7 points to 56.6, putting the British economic barometer well above the growth threshold again. Thanks to the prospect of easing corona restrictions, sentiment in the UK service sector also improved.

Ifo lowers growth forecast for German economy

The Munich-based Ifo Institute has downgraded its economic forecast for the current year against the backdrop of the ongoing corona restrictions. Ifo now expects a GDP growth rate of +3.7%, instead of the +4.2% still predicted in December. The forecast depends crucially on the further course of the corona crisis, the economic research institute stressed. It is clear that the corona crisis will drag on and delay the expected strong upswing.

 

Economic Indicators March 25

MEZ Country Indicator Last
08:00 GE GfK Consumer Climate (April) -12.9
08:45 FR Economic Sentiment (March)  +97.0
09:30 SZ Swiss National Bank Monetary Policy Decision -0.75%
10:00 EZ ECB Monthly Bulletin
10:30 EZ ECB President Lagarde Speech
13:30 US GDP Q4 (annualized, revision, q/q) +4.1%
13:30 US Consumer Spending Q4 (q/q) +2.4%
13:30 US PCE Core Rate Q4 (q/q) +1.4%
13:30 US Initial Jobless Claims (weekly) 770,000

Earnings Calendr March 26

Country Corporate Period
GE BASF Capital Markets Day

 

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Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
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