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LGT Navigator: Three interest rate decisions to be announced this week

September 20, 2021

In the new trading week, the mood on capital markets will once again be largely determined by the central banks' monetary policy decisions. On Wednesday, it is eagerly awaited how the Federal Reserve will position itself in the direction of an exit from quantitative measures. On Thursday, the Bank of Japan and the Swiss National Bank will also communicate their interest rate decisions. Meanwhile, the mood on the stock exchanges remains one of caution in the face of worrying inflation data and mixed economic signals.

Three interest rate decisions to be announced this week

On Europe's stock markets, the focus at the end of last week was on the big quarterly drop on the futures exchanges, which means that share prices are often determined by technical aspects. The EuroStoxx 50 exited trading on Friday at 4'130.84 points with a daily loss of almost -1%. On the New York Stock Exchange, the Dow Jones Industrial declined by about -0.5% and closed at 34'584.88 points. The S&P 500 fell by -0.92% to 4'432.99 points and on the Nasdaq technology exchange, the indices fell by about -1% on Friday. Meanwhile, the gold price fell to USD 1'748 per ounce, the lowest level in about five weeks, weighed down by a higher US dollar. The focus is now on the monetary policy decisions of the Fed on Wednesday and the Japanese and Swiss central banks on Thursday.

In Asia, the stock indices started the new week unevenly, with the Tokyo, China and South Korea stock exchanges closed for a holiday. A price plunge in Hong Kong, where the Hang Seng index plunged by more than -3% today, caused a stir. At the center is the troubled Chinese real estate group Evergrande. Regulators warned of a destabilization of the financial system given the group's debt of around USD 300 billion.

Inflation rate in the eurozone at highest level for almost ten years

Consumer price inflation in the euro countries reached +3.0% in August, the highest level since November 2011, compared with +2.2% for the year in July. Price pressure was mainly driven by energy prices, which rose by +15.4% year-on-year. However, prices of food and industrial goods also rose +2-3%. Excluding energy prices, which are susceptible to fluctuations, the core inflation rate jumped impressively from +0.7% in July to +1.6% in August. The European Central Bank (ECB) is actually targeting an inflation rate of 2% in the medium term, but has repeatedly stressed that it considers the rise in inflation to be temporary due to numerous special effects, most of which are attributable to the corona crisis.

ECB Vice President warns of prolonged inflationary pressure

According to European Central Bank Vice President Luis de Guindos, inflationary pressures in the eurozone could increase significantly more this year than previously expected. This is particularly the case if supply bottlenecks and material shortages persist. These problems not only affect the prices of microchips and semiconductors, but also energy and transportation prices, for example, de Guindos said in a newspaper interview. The upcoming wage negotiations in the fall also represents an uncertainty. The ECB will monitor this development closely. In addition, the structural forces, such as globalization, digitalization, and demographic developments, that have been responsible for long-lasting low inflation could also change.

Americans show more optimism, but also expect inflation to rise

Consumer sentiment in the United States improved in September compared with the previous month, according to the latest survey results from the University of Michigan. The corresponding consumer confidence barometer climbed from 70.3 points to 71.0. In particular, the expectations of the private households surveyed improved. The corresponding indicator rose from 77.1 to 78.5 points. On the other hand, consumers also expect inflation to increase. For example, inflation expectations on a twelve-month horizon increased from 4.6% to 4.7% compared with the previous month. On a five-year horizon, they remained constant at 2.9%.

 

Economic Indicators September 20

MEZ Country Indicator Last period
00:00 JP, CN, SK Holiday
08:00 GE Producer Prices (August, y/y) +10.4%
11:00 GE Bundesbank Monthly Report
16:00 US NAHB Housing Market Index (September) 75.0

 

Earnings Calender September 21

Country Company Period
UK Kingfisher H1
US FedEx Q1
US Adobe Q3

 

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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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