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LGT Navigator: Earnings season picks up speed again in Europe

August 3, 2020

Investor interest this week is once again focused primarily on the current corporate reporting season. After the series of quarterly reports reached its peak with strong results from the US tech companies Apple, Alphabet and Amazon last week, the next few days will be dominated by European blue chips, including Oerlikon, Bayer (Tuesday), Allianz, BMW (Wednesday), Adecco, Siemens and Adidas (Thursday). At the beginning of this week, the latest survey results of the ISM-index will be of particular interest and will also be closely followed. 

Earnings season remains in focus of stock markets

The Chinese industry remains on course for recovery. The private Caixin/Markit Purchasing Managers' Index rose to 52.8 points in July (June: 51.2), thus improving more strongly than expected. Last week, the official PMI (purchasing managers' index) published by the Chinese statistical office was already much better than expected.

The Asian stock markets have a mixed start to the new week. The Shanghai Composite gained +1.3% on Monday. In Tokyo, the Nikkei climbed +2%. In Hong Kong the Hang Seng Index loses -0.9%.

Microsoft expresses interest in TikTok

The US technology giant Microsoft confirmed on Sunday its interest in the American business of the video platform TikTok. The aim is to reach a deal with the Chinese TikTok owner ByteDance by September 15th. This could possibly prevent the popular app from being banned by President Donald Trump. 

Trump's test balloon does not take off

US President Donald Trump's proposal to possibly postpone the presidential election in November due to the dramatic corona crisis situation in the US has also attracted massive criticism from Republican ranks. On Friday, Trump rowed back and confirmed that he would stick to the constitutional election date of the first Tuesday in November. The president defended himself, however, and criticized for his part that due to the pandemic many voters could be forced to vote by mail, what might be susceptible to fraud and could lead to long delays. “I don't want to have to wait three months and then find out that all the ballots are missing and that the election is meaningless,” Trump said. As is so often the case, Trump seems to be weighing up how far he can go in the “land of opportunity” with a provocation.

Americans' mood clouds over again in the face of the crisis

According to the final survey results of the University of Michigan, consumer confidence in the US deteriorated significantly again in July. The sentiment barometer dropped from 78.1 points in June to 72.5 points, just above the eight-year low recorded in April. The expectations index fell back to the six-year low recorded in May. 

Dramatic economic slump in the euro zone

As in the USA, the economy in the euro zone also suffered a massive slump during the second quarter due to the corona crisis. Gross domestic product in the euro countries slumped by -12.1% quarter-on-quarter, the sharpest economic slump since the start of the data series in 1995. Economic output in the euro zone had already fallen by -3.6% in the first quarter, which textbook predicts a recession. 

In Germany, Europe's largest economy, GDP had slumped by -10.1% in Q2 - the sharpest decline since quarterly calculations began in 1970. The French economy also suffered a massive slump in the second quarter due to the corona-induced nationwide standstill. The gross domestic product fell by -13.8% compared to the previous quarter (consensus -15.2%) and thus even more sharply than the German economy (-10.1%). The French central bank expects economic output to contract by -10% in 2020. 

In Italy, GDP has fallen by -12.4% quarter-on-quarter, also as sharply as since the survey began in 1995. Spain's economy suffered an 18.5% quarter-on-quarter decline in GDP during the Corona crisis (consensus -16.6%), sliding into the deepest recession in the country's history. In its forecast, the EU Commission assumes that Spain's economic output will decline by -10.9% in the current year.

Euro economy needs longer-term safety net

In the opinion of ECB boss Christine Lagarde, the European Central Bank should maintain its economic support measures until at least June 2021 in order to lead the economy in the euro zone out of the Corona crisis. The safety net must be effective in the longer term. In June, the ECB had increased its emergency bond purchase program (PEPP) by EUR 600 billion to EUR 1.35 trillion and extended the purchases until at least the end of June 2021. 

Slightly higher inflation in the euro zone

Consumer prices in the euro zone rose by +0.4% in July compared with the same period of the previous year. Economists had actually expected the inflation rate to fall from +0.3% in June to +0.2%. Consumers had to pay more in July, especially for food, but on the other hand energy prices fell by around -8% over the year as a whole. 

Economic Indicators August 3rd

MEZ Country Indicator Last
03:45 CN Caixin PMI Manufacturing July 51.2
08:30 SZ Verbraucherpreise July (y/y) -1.3%
09:15 SP IHS Markit PMI Manufacturing July 49.0
09:30 SZ PMI Manufacturing July 41.9
09:45 IT IHS Markit PMI Manufacturing July 47.5
16:00 US ISM PMI Manufacturing July 52.6

Earnings Calendar August 3rd

Country Corporate Period
SZ Dufry H1




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US employment growth remains dynamic at the beginning of the year