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LGT Navigator: Weekly start with handbrake applied

June 7, 2021

The eagerly awaited US labor market report only partially met the high expectations, but nevertheless confirmed the scenario of a further recovery of the economy. Overall, this did not heighten existing inflation and interest rate concerns on the capital markets. On the other hand, US Treasury Secretary Yellen expressed relaxation regarding the prospect of higher interest rates, which could ensure a subdued start to the week on the stock markets. The G7's agreement on a minimum corporate tax rate also caused a stir.

Weekly start with handbrake applied

The American stock indices went into the weekend on Friday with slight gains. The Dow Jones Industrial gained +0.52% to 34'756.39 points for a weekly gain of +0.66%. The market-wide S&P 500 ended the day's trading on Friday +0.88% higher at 4'229.89 points. However, the labor market report, which remained below expectations, provided especially on the technology exchange Nasdaq at the end of the week for strong gains. The Nasdaq Composite rose +1.47% to 13'814.49 points and the Nasdaq 100 +1.78% to 13'770.78 points.

Over the weekend, the US Treasury Secretary Janet Yellen expressed calmness on the sidelines of the G7 meeting regarding the outlook for higher interest rates, which could possibly cause unrest on the stock markets at the beginning of the week. Yellen said that US President Joe Biden should push ahead with the USD 4 trillion investment program, even if it increases inflationary pressure in the coming years and results in higher interest rates.

In Asia, stock indices trended inconsistently at the start of the week. Support was provided by the latest figures on China's foreign trade. In May, exports rose over the year by +27.9% and imports even increased by +51.1%. The background is primarily the base effect due to the corona-related slump in the prior-year period. Overall, however, economists had expected an even more significant increase in Chinese exports and imports.

The inflation and interest rate concerns are likely to accompany the stock markets this week. The focus will be on the data on US consumer prices due on Tuesday.

Accelerated job growth in the US

The US labor market continued its recovery in May after a weak previous month. Although job growth of +559'000 was clearly below the +675'000 expected by analysts on average, it was significantly stronger than in April. Particularly large numbers of jobs were filled in May in the services sector (+300'000), which benefited from the easing of the corona restrictions. Surprisingly, the unemployment rate fell sharply to 5.8% in May, from 6.1% in April. The labor market also showed strength with the increase in wages. Average hourly wages increased by +2% on an annual basis. Despite the recovery, however, the labor market in the US is still strongly marked by the corona-related slump in the previous year. As a result, around 3.5 million more people are currently unemployed than in February 2020.

G7 pave the way for a globally uniform corporate minimum tax

After years of negotiations, the finance ministers of the seven leading industrialized nations (G7) have agreed on a global corporate tax rate of at least 15%. At the meeting in London, it was also decided that in future companies will pay taxes where they generate their sales. Britain's Finance Minister Rishi Sunak called the agreement “historic” and said the reform would make the tax system fit for the global digital age. US Treasury Secretary Janet Yellen expects the reform to have a positive effect on the global economy because companies would be able to compete and invest on a level playing field.

Central bank leaders emphasize climate risks

ECB President Christine Lagarde and Federal Reserve Chairman Jerome Powell stressed the dangers posed by climate change at the Bank for International Settlements' (BIS) Green Swan Conference. According to Powell, there is no doubt that climate change poses profound challenges to the global economy and certainly to the financial system. What is needed, he said, are national authorities, international groups, and the private sector. ECB chief Lagarde even called for concerted intervention by global central banks. Within the ECB, Lagarde argues for a broad consensus that climate change must be considered in all central bank activities.

Economic Indicators June 7

MEZ Country Indicator Last period
07:45 SZ Unemployment Rate (May) 3.0%
08:00 GE Industrial Orders (April, m/m) +3.0%
08:30 SZ Consumer Prices (May, y/y) +0.3%
10:30 EZ Sentix Economic Outlook Investors +21.0


Earnings Calender June 7

Country Company Period
US Apple Developer Conference WWDC
US Pharma Conference ASCO


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