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LGT Navigator: Bank of England intervenes in the bond market and Porsche makes its stock market debut

September 29, 2022

The British central bank felt compelled to intervene directly in market events due to the ongoing turbulence on the bond and currency markets. Europe's stock markets initially recovered significant losses in the middle of the week and managed to climb into positive territory, and on Wall Street the indices ended their six-day losing streak. The focus today is on the IPO of Porsche AG on the Frankfurt Stock Exchange.

Bank of England intervenes in the bond market and Porsche makes its stock market debut

The Bank of England is trying to counteract the recent sharp rise in interest rates on the British capital market and announced that it will start buying long-dated government bonds with immediate effect. The purchases are to be limited in time until mid-October, but no upper limit was specified. The announcement of massive tax cuts by the new British government under Prime Minister Liz Truss, which could trigger an uncontrolled rise in government debt and damage Britain's credit rating, caused severe turbulence on the bond and foreign exchange markets. As a result, interest rates on long-dated British government bonds rose sharply and the pound sterling plunged to record lows against the US dollar and other currencies.

Meanwhile, the International Monetary Fund (IMF) criticized the new British government's tax cut plans unusually harshly. “Given the high inflation in the UK and many other countries, large and untargeted fiscal packages are not recommended at the moment as it is important that fiscal policy does not work in opposition to monetary policy.”

Wall Street ends six-day losing streak

The Dow Jones Industrial left behind a six-day losing streak with a strong jump in prices on Wednesday, after trading at its lowest level since November 2020 the day before. The Dow closed +1.88% higher at 29'683.74 points. The S&P 500 was up +1.97% at 3'719.04 points and on the Nasdaq, the indexes were up nearly two percent. Also contributing to the recovery on the New York Stock Exchange was a decline in the yield on ten-year US government bonds to around 3.73%. Previously, the benchmark bond had reached a yield of just under 4%.

Stocks in the Asia-Pacific region followed the positive guidance from New York on Thursday. In Tokyo, the Nikkei 225 is up about +1% and in Hong Kong, the Hang Seng gains +1.3%. The Shanghai Composite rises by about +0.9% and the Shenzhen Component by about 1%. The broadest MSCI index for Asia-Pacific equities outside Japan also trades +1% higher than the previous day.

Stock market debut of Porsche AG

The IPO of Porsche AG is eagerly awaited today. The Stuttgart-based sports car maker is expected to make the biggest German IPO since Telekom in 1996. The first trading price is to be announced on the Frankfurt Stock Exchange from 09.00 (CET). The issue price per preferred share has been set at EUR 82.50, which is at the upper end of the pre-issued range of EUR 76.50 to 82.50 per security.

ECB President Lagarde reaffirms determination in the fight against “extremely high inflation”

The European Central Bank (ECB) “will do what needs to be done,” central bank chief Christine Lagarde promised yesterday in Frankfurt. She said the inflation trend was more persistent and of a magnitude that no one had expected. After two sharp rate hikes in July and September, the ECB's key interest rate now stands at 1.25%. Another rate hike is also expected at the next regular meeting of the ECB's Monetary Policy Council on October 27.

Economic Indicators September 29

MEZ Country Indicator Last period
09:00 ES Consumer Prices (September, y/y) +10.5%
11:00 EZ Economic Sentiment (September) 97.6
11:00 EZ Business Climate (September) 0.83
11:00 EZ Consumer Confidence (September)  -28.8
14:00 GE Consumer Prices (September, y/y) +8.8%
14:30 US GDP Q2 (revision, q/q) -0.6%
14:30 US Initial Jobless Claims (weekly) 213,000
14:30 US PCE Core Q2 (Fed Inflation Indicator, q/q) +4.4%


Earnings Calender September 29

Country Company Period
GE Porsche AG IPO
UK Next H1
US Nike Q1


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