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LGT Navigator: The pandemic risk factor gains weight again

November 22, 2021

A significant worsening of the pandemic in the face of a massive fourth wave of corona with a simultaneous insufficient vaccination rate and also rising Covid-19 case numbers in the US is increasing concerns about renewed far-reaching restrictions, such as the lockdown in Austria, which is effective as of today. In the capital markets, the rapidly increasing pandemic risk is likely to make investors more risk averse.

The pandemic risk factor gains weight again

In Asia, stock markets started the new week without a clearly visible trend. On Friday, the US stock indices also went into the weekend without a clear direction. While the standard stocks continue to struggle, things went better on the technology exchange Nasdaq. The Dow Jones Industrial extended the recent losses and gave on Friday by -0.75% to 35'601.98 points. On a weekly basis, this resulted in a setback of -1.38%. The S&P 500 declined -0.14% to 4'697.96 points before the weekend. On the Nasdaq, however, the positive trend continued, and the indices increased by about half a percent. In the process, heavyweights such as Apple, Microsoft and Alphabet even reached new record highs while trading.

In addition to the further development of the corona crisis, which is not yet over, important economic data such as the purchasing manager surveys (Tuesday), the Ifo business climate (Wednesday) or the minutes of the last interest rate decision of the Federal Reserve (Wednesday evening) are in focus this week. On Thursday, the financial markets in the US will then remain closed due to the Thanksgiving holiday.

Important partial political success for US President Biden

After tough wrangling in the US House of Representatives, the large chamber of Congress gave green light with a narrow majority of Democrats, for the USD 1.75 trillion investment package for social and climate protection initiated by US President Joe Biden. Originally, the Biden administration's investment program had a volume of USD 3.5 trillion. However, the package still must pass the Senate, where political resistance is certainly to be expected.

Japan approves multi-billion-dollar stimulus package

The government of Prime Minister Fumio Kishida announced economic stimulus packages worth the equivalent of EUR 430 billion to help the world's third-largest economy emerge from the corona crisis and return to growth. Kishida's government, which has only been in office for a short time, felt compelled to act after a new slump in economic output in the third quarter.  

ECB President Lagarde “cements” her inflation outlook

The European Central Bank will not take the sharp rise in inflation lightly, but the ECB should not tighten its monetary policy prematurely considering the “temporary and supply-side inflation shock,” central bank chief Christine Lagarde reiterated. With this, Europe's top central banker repeated her assessment and thus virtually “cemented” her inflation outlook. According to Lagarde, the rise in inflation rates is undesirable and painful, and of course the ECB also has concerns about how long the phase will last. The ECB takes the concerns very seriously and is carefully monitoring developments. From today's perspective, inflation is being driven up largely by the exceptional circumstances created by the pandemic, he said. Monetary policy must therefore “remain patient and persistent,” the ECB president said at a banking congress in Frankfurt.

Strongest rise in German producer prices in 70 years

In Germany, producer prices rose +18.4% in October compared to the same period last year - the strongest increase since 1951! Compared with the previous month, producer prices also rose sharply by +3.8%. Energy prices alone rose by around +12% compared with September and by a little +48% over the year as a whole. Natural gas was around +80% more expensive than a year earlier, and electricity cost just under 50% more. It can be assumed that companies will pass on at least some of the resulting costs to consumers.

Economic Indicators November 22

MEZ Country Indicator Last period
09:30 UK IHS Markit PMI Composite (October) 54.1
10:00 GE Bundesbank Monthly Report
14:30 US Fed Chicago National Activity Index (October) -0.13
16:00 US New Home Sales (October, m/m) +7.0%
16:00 EZ Consumer Sentiment (November)  -4.8


Earnings Calender November 22

Country Company Period
SZ Julius Baer Q3 Sales
US Zoom Video Communications Q3
US Agilent Technologies Q4


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