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LGT Navigator: The troubles remain the same

November 12, 2021

The noticeable increase in nervousness regarding inflation expectations, a renewed noticeable worsening of the corona pandemic and a disappointing quarterly result of the entertainment company Walt Disney caused restraint on Wall Street. On Asia's stock markets, however, inflation concerns seem to have eased somewhat in the short-term. However, the big question remains whether inflation is “only“ a temporary phenomenon based on base effects, or whether it will be more sustained and thus problematic for capital markets and central banks.

The troubles remain the same

On the New York Stock Exchange, stock indices trended without clear direction on Veterans Day. The Dow Jones Industrial closed -0.44% lower at 35'921.23 points, while the broad S&P 500 remained virtually unchanged; closing at 4'649.27 points (+0.04%). The main drag was a slide in Walt Disney's share price after the company missed consensus on profit and revenue for the fourth fiscal quarter and failed to meet expectations, particularly for its Disney+ streaming service. The Disney share lost at times up to -7%. Slight gains were made, however, the Nasdaq indices: the Nasdaq 100 closed +0.29% firmer at 16'032.47 points.

In Asia, inflation concerns moved back into the background at the end of the week and most stock indices trended firmer. On the other hand, the gold price held against the backdrop of increasing inflation fears near the mid-week five-month high of around USD 1'868 per ounce.

Brussels executive expects growth to be somewhat stronger, but subject to risks

According to the EU Commission, the economy in the European Union will grow by +5.0% on average in the current year. In the summer, the forecast was still +4.8%. However, the renewed corona wave, high energy prices and ongoing supply chain problems pose a significant risk, warned EU Economic Commissioner Paolo Gentiloni. For 2022, however, the Commission expects a GDP expansion rate of +4.3% (previously +4.5%). In terms of inflation developments, the executive expects EU inflation to average +2.6% this year and then cool back to 1.6% by 2023.

ECB roadmap under discussion

According to ECB Governing Council member and President of the Austrian central bank Robert Holzmann, the European Central Bank (ECB) could end its entire securities purchase program entirely as early as next year. “All purchases could be terminated in the fall or toward the end of 2022, should inflation sustainably meet the ECB target,” Holzmann opined. At the last monetary policy decision on Dec. 16, the ECB plans to decide on the roadmap of the two programs - the EUR 1.85 trillion corona assistance package PEPP and the general QE package APP of EUR 20 billion per month.

Only slow recovery of the British economy

The UK's gross domestic product expanded by +1.3% in the third quarter compared with the previous quarter. This means that the recovery has continued, but at an even weaker pace than expected. In the second quarter, the UK economy had grown by a much stronger +5.5% and analysts had forecast a somewhat stronger growth rate of +1.5% for Q3. In addition to the after-effects of Brexit (labor shortage), the UK economy is also suffering above all from latent supply chain problems.

Economic Indicators November 12

MEZ Country Indicator Last period
08:30 SZ Producer Prices (October, y/y) +4.5%
08:45 FR Consumer Prices (October, y/y)
09:00 ESP Consumer Prices (October, y/y) +5.5%
10:30 POR GDP Q3 (q/q) +2.9%
11:00 EZ Industrial Production (September, y/y) +5.1%
16:00 US Consumer Sentiment Survey University Michigan 71.7


Earnings Calender November 12

Country Company Period
SZ Richemont Q3
GE Deutsche Telekom Q3 
UK AstraZeneca Q3


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