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LGT Navigator: Caution dominates market sentiment ahead of the earnings season

January 13, 2021

Investors held back on big bets ahead of the corporate reporting season starting at the end of the week and due to the uncertain economic outlook against the backdrop of the corona crisis and already proud equity valuations. Supportive is the expectation of further fiscal policy assistance after Biden takes office in the United States, as well as further positive news in the fight against the pandemic. For example, AstraZeneca's vaccine should soon receive approval in Europe. In Switzerland, meanwhile, the authorities gave green light for the Moderna vaccine.

Caution dominates market sentiment ahead of the earnings season

After a weak start to the week, share prices on the New York Stock Exchange trended more or less sideways on Tuesday. In view of the upcoming reporting season of American blue chips and already high valuations, investors do not seem to want to venture too far out of the window at the moment. The Dow Jones Industrial ended yesterday's trading day with a moderate plus of +0.19% at 31'068.69 points and the S&P 500 remained virtually unchanged at 3'801.19 points (+0.04%). Meanwhile, in Washington, Vice President Mike Pence rejected a removal of President Donald Trump initiated by him. Thus, the Democrats are likely to implement their resolution to a second impeachment trial against Trump. Meanwhile, the video channel YouTube also blocked the account of the American president.

The current restraint of investors was already noticeable on Europe's stock exchanges. The EuroStoxx 50 fell by -0.23% to 3'612.13 points. Support certainly offer the positive news on vaccines. Yesterday, for example, the Swedish-British pharmaceutical group AstraZeneca applied for approval of its corona vaccine at the European Medicines Agency (EMA), which means that an approval should be available in a short time. The EU has ordered up to 400 million doses of the vaccine. Meanwhile, Swiss regulator Swissmedic granted approval to Covid-19 vaccine from US manufacturer Moderna. On Asian stock exchanges, indices trended without a clear trend, while futures markets indicate a trading start in Europe with slight discounts. 

Janet Yellen on her way to top US Treasury post

Former Federal Reserve Chair Janet Yellen is very likely to be confirmed as the new Treasury secretary by the Senate Finance Committee on January 19. If Yellen is confirmed by the Senate, the 74-year-old economist would be the first woman to head the US Treasury. Back in 2014, she became the first woman to chair the Fed. Yellen is expected to advocate for greater use of fiscal policy in the fight against the corona crisis, in response to calls from US Federal Reserve Chairman Jerome Powell.

Yellen's appointment as Treasury secretary to President-elect Joe Biden represents a match and complementarity between the things they are trying to do and many of the things the Fed is working on, Atlanta Fed President Raphael Bostic said. He said he is confident that issues around economic inclusion and equality will be a centerpiece of the new Biden administration and will reinforce the Fed's increasing focus on these issues.

Reduction in Fed bond purchases under discussion soon?

Dallas Fed chief Robert Kaplan has floated a discussion of the Fed reducing bond purchases later this year if the US economy recovers as hoped. At the very least, Kaplan said, discussion needs to begin about a possible tapering of bond purchases. For now, however, the corona crisis certainly needs to be addressed with the Fed's help, and as aggressively as possible, the Texas Fed chairman commented.

ECB Director sees currently no risk of inflation from expansionary monetary and fiscal policy

ECB Director Isabel Schnabel does not currently assess the risk of a sharp rise in inflation in the euro area as an acute risk against the backdrop of the ECB's accommodative monetary policy and concurrent expansionary fiscal policy. On the other hand, Schnabel also emphasized that inflation is by no means dead. The fact that inflation has been so low for such a long time is mainly due to structural changes in the national economy, such as the rise of China as a significant factor for the global economy. Digitalization and demographics also play a role.



Economic Indicators January 13

MEZ Country Indicator Last
10:00 IT Industrial Production (November, y/y) -2.1%
11:00 EZ Industrial Production (November, y/y) -3.8%
14:30 US Consumer Prices (December, y/y) +1.2%
14:30 US Core Consumer Prices (December, y/y) +1.6%

Earnings Calendar January 15

Country Corporate Period
US JPMorgan Chase Q4
US Citigroup  Q4
US Goldman Sachs Q4
US Alcoa


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