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LGT Navigator: Difficult year end for investors

December 20, 2021

Following the series of central bank decisions last week, capital markets must come to terms with the fact that monetary policy is becoming more restrictive against the backdrop of increased inflationary pressure, and that the flood of liquidity is being stemmed. As a result, the start to the Christmas week on equity markets is characterized by losses. This week, only a few impulses from central banks or economic data are expected, which means that towards the end of the year, the focus is likely to be increasingly on liquidity in the markets. Market events continue to be overshadowed by the uncertain development of the pandemic and the effect of the Omicron variant. This means that a difficult year end lies ahead for investors.

Difficult year end for investors

On Wall Street, the indices went into the weekend with losses on Friday, with standard stocks under greater pressure than technology stocks. On Asia's stock exchanges, most stock indices are also trending in negative territory this morning. This despite Japan's central bank chief Haruhiko Kuroda assuring that it is still too early to consider normalizing monetary policy. Kuroda thus supports the view that Japan's central bank will lag other central banks in turning monetary policy around. In China, the central bank cut its key lending rate for the first time since April 2020 to support growth in a slowing economy. The central bank eased the one-year LPR by five basis points to 3.80%, while leaving the five-year LPR unchanged at 4.65%.

Eurozone inflation rate continues to climb

Consumer prices in the 19 eurozone countries rose by +4.9% in November on an annual basis. The inflation rate thus reached a new record level, or the highest value since the beginning of monetary union. In October, the annual inflation rate had still been +4.1%. Energy prices increased by +27.5% year-on-year. The core rate, i.e. excluding energy prices, rose from +2.0% in October to +2.6%. Last Thursday, at its last interest rate decision this year, the ECB reiterated its assessment that the massive increase in inflationary pressure was merely a temporary phenomenon but acknowledged rising risks regarding its inflation outlook.

Ifo business climate index falls to lowest level since February

The business climate barometer published monthly by Munich-based economic research institute Ifo dimmed for the sixth month in a row in December and now stands at 94.7 points (consensus 95.3), the lowest level since February this year. Consumer-related service companies and the retail sector are being hit hard by the worsening pandemic situation, Ifo commented. In manufacturing, on the other hand, sentiment had improved slightly despite ongoing supply bottlenecks for intermediate products and raw materials.

Russia's central bank raises key interest rate

The Russian central bank raised interest rates by 100 basis points to 8.5% in response to increasing inflationary pressure. In November, the inflation rate in Russia reached +8.4%. The Bank of Russia also held out the prospect of further interest rate steps.

Economic Indicators December 20

MEZ Country Indicator Last period
16:00 US Leading Indicator (November, m/m) +0.9%


Earnings Calender December 20

Country Company Period
US Nike Q2
US Micron Technology Q1


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

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