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LGT Navigator: US hedge fund debacle unsettles stock markets and weighs on banking sector

March 30, 2021

Fears of a default of the US hedge fund Archegos Capital, which got into trouble because of derivatives transactions, weighed on stock market sentiment at the beginning of the week and caused prices of some bank stocks to plummet. On the other hand, the end of the blockade of the Suez Canal and the prospect of further fiscal policy aid in the form of infrastructure spending in the US had a positive effect on investor morale.

US hedge fund debacle unsettles stock markets and weighs on banking sector

The troubled American hedge fund Archegos Capital Management, owned by investor Bill Hwang, caused a stir worldwide and is likely to have massive consequences for some of the commercial banks involved. Thus, on Monday, the Credit Suisse stocks temporarily lost about -13% and weighed on the entire sector. According to the Wall Street Journal, the hedge fund was forced to sell shares worth up to USD 30bn. However, the debacle around Archegos Capital didn't drag down the overall stock market sentiment. Thus, the Dow Jones Industrial ultimately closed +0.30% higher at 33'171.37 points and the market-wide S&P 500 remained virtually unchanged at 3'971.09 points (-0.09%). The technology selection index Nasdaq 100 slipped -0.1% to 12'965.74 points. On the positive side, the Biden administration's plans for an infrastructure program and hopes that the rapidly progressing vaccination campaign in the US will be able to contain the pandemic.

In Asia, the stock indices were mixed this morning. In addition to the turmoil surrounding the US hedge fund, resurgent inflation fears have pushed bond yields higher, which in turn has a negative impact on equities. For European stock markets, however, futures are signaling moderate gains at the start of trading. In Europe, the focus will continue to be on the difficult corona situation ahead of the Easter holidays.

Leading research institutes expect economic recovery in the eurozone from the second quarter onwards

In a joint forecast, the Munich-based economic research institute Ifo, the Konjunkturforschungsstelle (KOF) in Zurich and Istat in Rome expect the eurozone economy to recover after a weak first quarter. In Q1, euro GDP is still expected to decline by -0.4%, but then to pick up by +1.5% in Q2 and by as much as +2.2% in Q3 compared with the previous quarter in each case. At the same time, however, the institutes expect inflationary pressure to increase. Consumer price inflation is forecast to average +1.8% in Q2 and +2.1% in Q3. However, the forecasts are subject to a high degree of uncertainty due to the ongoing corona crisis.

German exporters more optimistic according to Ifo

According to a recent Ifo survey, the German industry is much more confident about the future. The corresponding business climate indicator improved strongly in March from 11.9 to 24.9 points, reaching its highest level since January 2011. According to Ifo, German exporters are benefiting from a strong economy in Asia and the US, but also from slowly increasing momentum in the eurozone.

Biden plans to drive energy transition and create jobs with wind energy expansion

The administration of US President Joe Biden wants to drive forward the energy transition in the United States by modernizing infrastructure and expanding electric mobility. By expanding wind energy, Washington also wants to create new jobs. Washington's goal is to generate 30 gigawatts of electricity annually from offshore wind farms by 2030, enough to meet the needs of more than ten million households. New offshore wind farms are planned on the US East Coast.


Economic Indicators March 30

MEZ Country Indicator Last
08:45 FR Consumer Sentiment (March) 91.0
09:00 SZ KOF Economic Indicator (March) 102.7
09:00 SP Consumer Prices (March, y/y) -0.1%
11:00 EZ Economic Sentiment (March)  93.4
11:00 EZ Consumer Confidence (March) -10.8
14:00 GE Consumer Prices (March, y/y) +1.6%
15:00 US S&P House Prices 20-biggest cities (January, y/y) +10.1%
16:00 US Consumer Confidence (March) 91.3

Earnings Calendr March 30

Country Corporate Period
GE BioNTech Q4
FR Total  Outlook & Strategy
CAN Blackberry Q4


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