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LGT Navigator: Interest rate hopes drive stock market recovery

June 5, 2019

After a weak start to the week, stock indices in Europe and on Wall Street began to recover, driven by hopes of a loosening of Fed interest rate policy.


Statements by high-ranking US central bank representatives spurred interest rate lowering fantasies on the capital markets. Yesterday, US Federal Reserve Chairman Jerome Powell stressed the risks of the ongoing trade conflict between the US and China. The Fed will closely monitor developments and react accordingly if necessary. James Bullard, head of the St Louis Fed, said that interest rate cuts might be appropriate due to the increased risks to US economic growth. Currently, the probability that the Fed will loosen its key rate again at its next meeting on 19 June is estimated at just under 15%. Looking ahead to September, the markets are currently assuming a probability of over 80% in view of the economic risks.

Euro-area inflation and unemployment at lows

Inflation in the euro zone fell sharply in May and the unemployment rate is at its lowest level since 2008. Consumer prices rose by +1.2% in May compared with the same period last year, making inflation in the euro zone much more moderate than in the previous month (+1.7%). Energy prices rose again over the year as a whole (+3.8%), but food and stimulants were also more expensive than average than in the same month last year. Core inflation, excluding energy and food, fell in the reporting period from +1.3% in the previous month to +0.8%. At the same time, the unemployment rate in the euro zone fell from 7.7% to 7.6%, its lowest level for more than ten years. The lowest unemployment rates were registered in Germany and the Netherlands. Greece, Spain and Italy continue to have the highest unemployment rates. Against this backdrop, the pressure on the ECB to refrain from the targeted interest rate turnaround could also increase. On Thursday, the ECB will decide on its further monetary policy stance.

Shell with ambitious outlook

British-Dutch oil company Royal Dutch Shell (RDS) plans to pay its shareholders around USD 125bn in dividends and share buybacks between 2021 and 2025. The shareholders could expect significantly higher earnings compared to the current five-year period. At the same time, RDS raised its organic free cash flow target to USD 35bn in 2025, based on an oil price of approximately USD 60 per barrel.

Economic Indicators June 5

MEZ Country Indicator Last
09:15 SP PMI Composite 53.10
09:45 IT PMI Composite 49.50
09:50 FR PMI Composite 51.30
09:55 GE PMI Composite 52.40
10:00 EZ PMI Composite 51.60
10:30 UK PMI Composite 50.90
11:00 EZ Retail Sales (y/y) +1.9%
14:15 US ADP Employment +275'000
15:45 US PMI Composite 50.90
16:00 US ISM PMI Non-Manufacturing 55.50

Earnings Calendar June 18

Country Corporate Period
US Oracle Q4



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Source: LGT Bank (Switzerland) Ltd.

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Redaktion: Alessandro Fezzi, +41 44 250 78 59, E-Mail:
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