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LGT Navigator: ECB maintains its inflation outlook

October 29, 2021

As expected, the European Central Bank (ECB) has confirmed its monetary policy course and left the key interest rates and the modalities of the securities programs as well as its forward guidance unchanged. ECB President Lagarde reiterated that the central bank expects inflation to rise “only” temporarily and that the economic recovery should continue.

ECB maintains its inflation outlook

On Europe's stock markets, the ECB's interest rate decision was well received and the EuroStoxx 50 closed with a daily gain of +0.31% at 4,233.87 points. Thus, the European benchmark index approached the high reached in September since 2008.

On Wall Street, quarterly reports remained in focus. On the Nasdaq, the indices again recorded record values. The Dow Jones Industrial gained +0.68% from the previous day to 35'730.48 points and the market-wide S&P 500 exited the day's trading almost one percent higher at 4'596.42 points. The Nasdaq 100 gained for the fourth day in a row, gaining +1.15% on Thursday to close at 15'778.16 points. Facebook caused attention with the renaming of the group in “Meta”. Shares of Apple fell by about -5% after the close as the iPhone manufacturer missed the market's revenue forecasts in the fourth fiscal quarter with lower than expected iPhone sales. Apple also warned of challenges due to supply chain disruptions.

ECB reaffirms inflation outlook

“We expect inflation to continue to rise in the near term, but then to come down over the next year,” central bank chief Christine Lagarde said. She thus reaffirmed the previous assessment that the increased inflationary pressure will only be of a temporary nature. In September, the inflation rate in the euro zone reached +3.4%, the highest level in 13 years. At the same time, ECB President Lagarde expects the euro economy to continue to recover strongly, even if momentum has slowed somewhat due to shortages of materials, equipment, and labor. However, further recovery would continue to depend on the course of the pandemic and further progress with vaccinations. Overall, the ECB describes the risks to the economic outlook in the eurozone as “broadly balanced.”

Slightly improved economic sentiment in the eurozone

In October, the EU Commission's Economic Sentiment Indicator (ESI) again signaled an improvement in general economic sentiment in the eurozone. The indicator climbed by 0.8 points to 118.6 in the current reporting month. Analysts, however, had expected a decline to 116.7 points. Sentiment in the service sector brightened particularly significantly.

Inflation in Spain higher than at any time in the last 29 years

In Spain, the cost of living rose by +5.5% on an annual basis in October, the strongest increase in the inflation rate since 1992. Unsurprisingly, this was due to higher energy prices.

Bank of Japan revises economic forecasts

Yesterday, the Bank of Japan presented its latest forecasts for economic growth and inflation at its monetary policy assessment. Against the backdrop of problems in global supply chains, the BoJ is now forecasting GDP growth of +3.4% in the current fiscal year (to the end of March 2022) (previously +3.8%). On the other hand, the central bank revised its projection for 2022/23 upward from +2.7% to +2.9%. In its inflation outlook, the BoJ now expects core consumer prices to stagnate in the current fiscal year (previously +0.6%) and to rise by +0.9% (unchanged) in the following year. This is still well below the central bank's long-term inflation target of two percent. 

Eagerly awaited UN climate summit

The 26th United Nations Climate Summit begins in Glasgow on Sunday. There are calls for countries to tighten up their climate targets and make them more concrete. However, it remains to be seen whether concrete implementation steps can be agreed - especially in view of the acute energy crisis in many countries. Stronger climate protection efforts could above all support shares of companies with a focus on renewable energies.

Economic Indicators October 29

MEZ Country Indicator Last period
07:30 FR GDP Q3 (q/q) +1.1%
08:00 GE Import Prices (September, y/y) +16.5%
08:45 FR Consumer Prices (October, y/y) +2.7%
09:00 SZ KOF Economic Indicator (October) 110.6
09:00 SP GDP Q3 (q/q) +1.1%
09:00 AUT GDP Q3 (q/q) +3.6%
10:00 GE GDP Q3 (q/q) +1.6%
11:00 EZ GDP Q3 (q/q) +2.2%
11:00 EZ Consumer Prices (October, y/y) +3.4%
11:00 EZ Core Consumer Prices (October, y/y) +1.9%
11:00 IT Consumer Prices (October, y/y) +2.9%
14:30 US Consumer Spending (September, m/m) +0.8%
15:45 US Chicago PMI Manufacturing (October) 64.7
16:00 US Consumer Confidence Michigan (October) 71.4


Earnings Calender October 29

Country Company Period
SZ Holcim Q3 Sales
SZ Swiss Re Q3
GE Daimler Q3
FR BNP Paribas Q3
FR Air France-KLM Q3
IT Eni Q3
DK Danske Bank Q3
UK Natwest Q3
US Exxon Mobil Q3
US Chevron Q3
US Colgate-Palmolive Q3


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