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Revived potential for rate cuts

Recent data on the US economy has rekindled hopes that the Federal Reserve will cut interest rates. In the new week, the focus will be on the Federal Reserve's regular Beige Book report on Wednesday and the Bank of Canada's decision on interest rates. Other highlights include the eagerly awaited ECB rate decision on Thursday and the monthly US jobs report on Friday. New records were set on Wall Street and in Asia. 

Alessandro Fezzi, LGT
Reading time
5 minutes
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On Wall Street, the S&P 500 index and the Nasdaq technology index hit new records on Friday. Investors are betting on an easing of monetary policy by the US Federal Reserve - a weaker-than-expected ISM manufacturing index and gloomy consumer sentiment also contributed - while artificial intelligence continues to drive technology stocks. The S&P 500 closed 0.8% higher at 5,137.08, while the Dow Jones Industrial rose 0.2% to 39,087.38 at the weekend. The Nasdaq indices gained just under 1.5% on Friday.

Meanwhile, the Purchasing Managers' Index (PMI) from the Institute for Supply Management (ISM) signalled a slowdown in the US industrial sector. The PMI unexpectedly fell to 47.8 in February from 49.1 at the start of the year, while economists had forecast an improvement to 49.5. At the same time, there were signs of a deterioration in US consumer sentiment. The University of Michigan's consumer confidence barometer fell to 76.9 points in February from 79.0 points in January. The two closely watched economic indicators added to the prospects of the Fed easing its monetary policy. The weak US economic data put pressure on the US dollar and the ten-year US Treasury yield.

In Asia, Japan's Nikkei 225 began the week at a record high, following the S&P500 and Nasdaq Composite's all-time highs on Friday. The Nikkei closed up 0.5%, well above the 40,000 mark. In Seoul, the Kospi was up just under 1.3%, while the small-cap Kosdaq was up 1.1%. South Korean markets returned to trading after a long weekend. Australia's S&P/ASX 200 closed 0.1% lower after hitting an all-time high on Friday. In China, the CSI 300 was down around 0.2% and Hong Kong's Hang Seng Index was down 0.1%. The focus is on the annual meetings of China's legislature, the National People's Congress, and the country's top political advisory body, the Chinese People's Political Consultative Conference, which are taking place at the same time. China's Premier Li Qiang is expected to deliver the government work report at the meetings, which will outline the economic and political goals for the world's second largest economy, including the GDP growth target.

On the commodities front, oil prices edged higher, with West Texas Intermediate
Crude oil prices briefly rose above USD 80 for the first time in four months as oil heavyweights Saudi Arabia and Russia and other major OPEC+ producers said they would extend voluntary crude oil production cuts until the end of the second quarter.

Gold prices continued to rally, hitting a one-month high of  USD 2,057 per troy ounce on Friday. The precious metal benefited from latent geopolitical tensions as well as renewed hopes of monetary easing by the major central banks and higher demand from China.

Ahead of the European Central Bank's (ECB) much-anticipated interest rate decision next Thursday, consumer price data for February showed that inflation in the eurozone fell further to 2.6% from 2.8% in January, but not quite as much as expected. Moreover, core inflation, which strips out volatile components such as energy and food, came in at 3.1%, well above expectations of 2.9%. Nevertheless, the ECB is expected to cut interest rates several times this year on the back of falling inflation. At the same time, the ECB has to contend with economic stagnation in the eurozone, which narrowly avoided recession last year with "zero growth" in GDP in the fourth quarter. Meanwhile, sentiment in the eurozone's industrial sector continued to deteriorate in February, albeit only marginally. S&P Global's monthly Purchasing Managers' Index (PMI) fell by 0.1 points to 46.5. S&P commented that there were tentative signs of improvement in the eurozone industrial sector.

Corporate news in focus: Aryzta, Belimo, Evonik, Gurit and Henkel.

Economic data in focus: Swiss consumer prices and eurozone Sentix investor confidence.


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Lten steht Ihnen ein Berater der Bank gerne zur Verfügung.

Herausgeber: LGT Bank (Schweiz) AG, Glärnischstrasse 36, CH-8027 Zürich
Redaktion: Alessandro Fezzi
Quelle: LGT Bank (Schweiz) AG

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