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LGT Navigator: Earnings season enters first hot phase

October 25, 2021

The corporate reporting season is gaining momentum this week and is likely to be central to stock market sentiment. The focus will be on the large technology stocks. Already this evening, Facebook will present its quarterly figures. Before the weekend, statements by Fed Chairman Powell, who signaled an imminent start of tapering, i.e. the exit from loose monetary policy, had slowed down particularly technology stocks.

Earnings season enters first hot phase

On Wall Street, technology stocks came under pressure on Friday. Weighed down on the one hand by a statement from US Federal Reserve Chairman Jerome Powell - who said that the Fed is on track to start reducing bond purchases – and on the other hand by disappointing outlooks from some popular technology companies, such as Snap. On the Nasdaq, the indices posted daily losses of around -0.9%. The Dow Jones Industrial and the S&P 500 both reached record highs again on Friday. The Dow then exited +0.21% higher at 35'677.02 points, posting a weekly gain of about one percent. The S&P 500 closed -0.11% lower at 4'544.90 points.

In Asia, the start of the week on the stock exchanges today without a clear trend.

Quarterly earnings statements in focus

The first nearly two weeks in the current quarterly reporting season indicate that corporate profits in the third quarter are again higher than analysts had forecast. On average, the profits published so far have been almost twelve percent above the market consensus. This week, the reporting season is now gaining significant momentum and numerous results of the major blue chips are expected. Investors are likely to focus on statements on the business outlook, supply chain issues and increased cost pressure. Already today, for example, we eagerly await the quarterly figures of Facebook. On Tuesday, UBS, Novartis, Alphabet and Microsoft, among others, will present their financial statements. On Wednesday, heavyweights such as BASF, Deutsche Bank, GlaxoSmithKline or McDonald's and Coca-Cola will report and on Thursday, Volkswagen, Apple and Amazon will follow. On Friday, Holcim, Swiss Re or Daimler will conclude the week. We would like to point out here that the companies listed here, however, do not represent a full agenda.

“The US will not lose control of inflation”

US Treasury Secretary Janet Yellen expressed confidence in an interview over the weekend that inflation levels would return to normal in the second half of next year and that the Federal Reserve would keep inflation under control. “On a 12-month horizon, inflation will remain high into next year because of base effects. But I expect an improvement in the middle to end of next,” Yellen said.

US private sector regains some momentum in October

Sentiment in the US private sector improved surprisingly strongly in October, according to IHS Markit's Purchasing Managers Index. The composite index (PMI Composite) climbed from 55.0 points in September to 57.3 points in October. The improvement was driven by the services sector; the PMI Services rose from 54.9 to 58.2. Meanwhile, the industrial sector suffered from supply chain issues; the PMI Industry fell from 60.7 to 59.2.

Business sentiment in the euro area continues to deteriorate

Purchasing managers surveyed by IHS Markit were again more pessimistic about the outlook in the eurozone in the latest survey. In October, the purchasing managers' index surprisingly fell sharply by 1.9 points to 54.3. Analysts had expected a decline to 55.2. According to the London-based research institute, the slowdown was due to ongoing disruptions in global supply chains.

British purchasing managers, on the other hand, more optimistic

The situation was different in the UK, where business sentiment improved noticeably this month. The purchasing managers' index climbed from 54.9 to 56.8 points. According to IHS Markit, sentiment improved in both industry and the service sector. In the case of service providers, this was due to stronger consumer spending thanks to the complete lifting of corona restrictions.

Russia's central bank surprises with strong key rate hike

Russia's central bank is fighting rising inflationary pressures with an unexpectedly sharp rate hike. The key interest rate was raised from 6.75% to 7.5% – the sixth key rate hike in a row. Economists, on the other hand, had expected a more moderate tightening of only 25 basis points. In addition, the central bank in Moscow also held out the prospect of further steps. In September, the inflation rate reached +7.4%.

 

Economic Indicators October 25

MEZ Country Indicator Last period
10:00 GE Ifo Business Climate (October) 98.8
14:30 US Chicago Fed National Activity Index (September) +0.29

 

Earnings Calender October 25

Country Company Period
FR Michelin Q3 
UK HSBC Q3 
US Facebook Q3 
US Kimberly-Clark Q3

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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