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Stock markets tread water - Beige Book in focus

Stock markets lacked positive impulses in the face of mixed quarterly figures on Wall Street and gloomy economic data from the US. Investor restraint remains dominant. In addition to the ongoing corporate reporting season, capital markets will pay close attention to the Beige Book, which will be published this evening, ahead of the next monetary policy decision by the US Federal Reserve on 3 May.

Alessandro Fezzi, LGT
Reading time
5 minutes
Federal Reserve
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US stock markets were virtually unchanged from the previous day's close on Tuesday. The Dow Jones Industrial closed 0.03% lower at 33,976.63 points and the S&P 500 0.09% higher at 4,154.87 points. On the Nasdaq, the indices also did not get far at the end of the day and remained more or less unchanged. Positive impulses were provided by the stronger than expected recovery of the Chinese economy in the first quarter.

At the individual stock level, some quarterly figures provided light and shade. The investment bank Goldman Sachs had to announce a drop in profits of 18% to USD 3.2 billion in the first quarter due to weak trading in bonds, commodities and currencies (-17% over the year). Bank of America, on the other hand, reported higher Q1 profits due to higher interest rates. After the market closed, Netflix published its quarterly figures. In the first quarter, the online video service increased its customer numbers by 1.75 million to 232.5 million user accounts. However, experts had expected a much stronger increase. The outlook for the current quarter was also mixed.

Uncertainty is caused by the further economic development in the US as well as the next step by the Federal Reserve. The President of the Federal Reserve of Atlanta, Raphael Bostic, said he considers a further interest rate hike of 25 basis points to 5-5.25% possible before the Fed analyses the effects of the rate hikes on the economy. This would raise the key interest rate in the US. His colleague James Bullard, President of the Federal Reserve of St. Louis, on the other hand, assumes that the key interest rate will be raised to 5.5-5.75%. The focus is now on the regular economic report of the US Federal Reserve. The so-called "Beige Book" provides information on the economic development in the individual economic regions and serves as a basis for the FOMC's decisions on monetary policy. Against this background, the yield on ten-year US government bonds remained just below 3.6%.

Meanwhile, the latest data from the US housing market was weak. The number of building permits and the number of new construction starts fell by 8.8% and 0.8%, respectively, in March. The main reason for this is the rise in mortgage rates, which have been holding back the US real estate market for some time.

In Asia, no clear trend could be discerned in the middle of the week. In Tokyo, the 225-stock Nikkei index fell by 0.4%, while the South Korean Kospi rose by 0.2%. Stock exchanges in mainland China were lower. In Shanghai, the composite index lost around 0.15% and in Shenzhen, the component index traded 0.35% lower. The Hang Seng Index in Hong Kong fell 0.4%, with the Hang Seng Tech Index losing 0.6%.

Corporate news in focus: Heineken and L'Oréal with Q1 sales and ASML with Q1 figures. From the US, we expect Q1 results from Tesla, Morgan Stanley, U.S. Bancorp, Travelers, Abbott Laboratories, IBM, Alcoa. 

Economic data in focus: UK consumer prices March (08:00 CET), Eurozone consumer prices March (11:00) as well as the US Federal Reserve's Beige Book (20:00).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi,
Source: LGT Bank (Switzerland) Ltd.

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