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LGT Navigator: What does September bring?

September 1, 2020

While equity markets in Asia showed no clear trend at the beginning of the new month, on Wall Street technology stocks were once again in the spotlight and the technology exchange Nasdaq celebrated new records. The Apple stock split, which came into effect yesterday and led to a reweighting in the Dow Jones index, attracted particular attention. While uncertainty about the further development of the corona pandemic is likely to continue to dampen investor sentiment in September, the US elections will more and more take center stage. Today, market participants are eagerly awaiting the latest results of the purchasing manager surveys in Europe and the US.

What does September bring?

Although the Dow Jones Industrial ended the last day of the month with a loss of -0.78% at 28 430.05 points, it can still report an impressive performance of just under +8% for the month of August. Once again, the focus was on technology stocks. The stock split at Apple, which took effect yesterday, attracted particular attention. Shareholders of the iPhone manufacturer will receive three more for each share. Apple's share price increased again by around +3% in yesterday's trading session. As a result of the stock split, Apple's weighting in the Dow Jones index fell, which is why it was regrouped in the index. The new entry is the software developer Salesforce. Tesla shares were also in the spotlight with a daily gain of just under +14%. The technology-heavy Nasdaq 100 climbed +0.96% and reached a further high of 12 110.70 points. At the same time, the S&P 500 dropped by -0.16% to 3 500.31 points. In Asia, the stock markets did not show a clear or uniform trend at the start of September. Meanwhile, the US dollar remains under heavy siege, trading near a two-year low against the euro and about to knock over the 1.20 mark.

A Milestone in US Federal Reserve Policy

The Federal Reserve's number two, Vice Chairman Richard Clarida, sees the strategy adjustment announced by Federal Reserve Chairman Jerome Powell at the Jackson Hole Symposium as a milestone. With the adjustment of monetary policy objectives, the Federal Reserve's policy is moving closer to the real economy. In the Fed's modern view, a low unemployment rate is not a sufficient prerequisite for an interest rate hike if inflationary pressures are not simultaneously increasing. The Fed would have to adapt to changing economic conditions. The new strategy of “Average Inflation Targeting“ offers more flexibility in controlling inflation and gives the Fed sufficient leeway to pursue its now prioritized goal of full employment.

Stagnating inflation in Germany

German consumer prices fell by -0.1% in August compared with the same period in the previous year. Inflation is being depressed by lower energy prices on the one hand and by the reduction in value-added tax in force since July 1 on the other. In addition, the upward trend in food prices weakened noticeably. In August, food prices still cost +0.7% more than in the same period in 2019, whereas in July and June food prices had risen by +1.2% and +4.4%, respectively.

Italy's economy hit hard by the corona crisis

The gross domestic product of Italy ­ the third largest economy in the euro zone ­ slumped by -12.8% in the second quarter compared to the previous quarter, according to official figures. The decline was thus again slightly greater than initially assumed at -12.4%. The economic restrictions imposed by the lockdown resulted in a -8.7% decline in consumption, as well as a slump in exports by -26.4% and in investments by almost -15%. The EU Commission expects Italy to lose -11.2% of its economic output in the current year. As a result of weak economic activity due to the corona pandemic, Italian consumer prices also fell by -0.5% year-on-year in August. Compared with the previous month, prices even fell by -1.3%.



Economic Indicators September 1st

MEZ Country Indicator Last
09:15 SP IHS Markit PMI Manufacturing (August) 53.5
09:30 SZ PMI Manufacturing (August) 49.2
09:45 IT IHS Markit PMI Manufacturing (August) 51.9
09:50 FR IHS Markit PMI Manufacturing (August) 49.0
09:55 GE IHS Markit PMI Manufacturing (August) 53.0
10:00 EZ IHS Markit PMI Manufacturing (August) 51.7
10:30 UK IHS Markit PMI Manufacturing (August) 55.3
11:00 EZ Consumer Prices (August, y/y) +0.4%
11:00 EZ Core Consumer Prices (August, y/y) +1.2%
11:00 EZ Unemployment Rate (July) 7.8%
15:45 US IHS Markit PMI Manufacturing (August) 53.6
16:00 US ISM Manufacturing PMI 54.2

Earnings Calendar September 3

Country Corporate Period
SZ Kaba Holding Full Year


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Source: LGT Bank (Switzerland) Ltd.

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US employment growth remains dynamic at the beginning of the year