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LGT Navigator: Economic data and possible convergence on Capitol Hill drive Wall Street

October 1, 2020

Better-than-expected US labor market data from ADP and a new compromise proposal for a US corona aid package created a somewhat friendlier tone on Wall Street, after prices on European stock markets came under pressure following the first direct exchange of blows between US President Trump and his challenger Biden. On the financial markets, Trump's recent statement that he might not accept a defeat made investors nervous. The focus is now on the official labor market report due on Friday.

Economic data and possible convergence on Capitol Hill drive Wall Street

After the Democrats in the US Parliament put forward a new proposal for a USD 2.2 trillion corona bailout package in mid-week, the Republican side is now countering with a USD 1.5 trillion counter-proposal to contain the economic consequences of the pandemic. However, the dispute over the scope and design of the economic stimulus package is unlikely to be over by any means, and it remains questionable whether the parties will be able to agree on an early solution in the heated election campaign.

On the New York Stock Exchange, the Dow Jones Industrial climbed over 28 000 points and closed with a solid daily gain of +1.2% at 27 781.70 points. The leading American index thus ended September with a minus of -2.3%. Seen over the third quarter, the result is a plus of +7.5%. The broad-based S&P 500 ended yesterday's trading day with a gain of +0.84% at 3 363.0 points. In Asia, most stock indices showed mixed trends, despite positive indications from the US equity markets, with trading on the Tokyo Stock Exchange down due to a technical problem and stock exchanges in China, Hong Kong and South Korea closed for a holiday. The MSCI index for Asian stocks outside Japan rose by around +0.7%, but market sentiment remains fragile following the chaotic TV debate and increasing uncertainty about the outcome of the US presidential election. For the stock markets in Europe, the futures signal a somewhat firmer opening.

ADP data raise hopes for further recovery in the US labor market

Before the official labor market data takes center stage on Friday, the labor market services firm ADP (Automatic Data Processing) yesterday released its report on the employment situation in the American private sector. According to the report, the number of employees increased by 749 000 month-on-month, which is significantly higher than analysts had expected with an average of 649 000. In addition, job growth in August was stronger than previously assumed. According to revised figures, employment grew by 481 000 in the previous month (first estimate 428 000). According to ADP, the increase was particularly pronounced in the service sector, where most jobs were lost during the corona-related lockdown.

The US GDP figures also released yesterday confirmed that the US economy contracted by an annualized -31.4% in the second quarter. The slump was thus somewhat smaller than the -31.7% assumed in a previous estimate.

ECB leadership reflects on more flexible inflation target

According to European Central Bank President Christine Lagarde, the central bank could be more flexible in interpreting its inflation target as part of the ongoing strategy review. Lagarde confirmed that this is currently being discussed in the ECB's Governing Council. The fundamental question here is whether, after a prolonged period of too low inflation, higher inflation should be tolerated thereafter. Currently, the ECB is aiming for an inflation rate of just under 2% as the ideal value for the economy, but has been missing this target for years. The strategy review is to be completed in the second half of 2021.

SNB is fighting the strength of the Swiss franc with billions

The Swiss National Bank (SNB) has reportedly spent a total of CHF 90bn on foreign exchange interventions in the first half of the year to prevent a revaluation of the Swiss franc as a result of the corona crisis, which would be detrimental to the domestic export industry. Unlike in the past, the SNB has for the first time published its intervention amounts early in a quarterly report after the US government pressed for timely publication of foreign exchange data.

Record crash of the British economy in Q2 somewhat less than feared

According to revised figures, the UK's gross domestic product fell by -19.8% in the second quarter compared with the previous quarter. However, the slump was slightly less than an initial calculation of -20.4% had shown. For the year 2020 as a whole, the Bank of England expects economic output to decline by -9.5%. The United Kingdom has been particularly hard hit by the corona pandemic and, with 42 000 deaths, has the highest number of Covid-19 deaths in Europe to date.


Economic Indicators October 1

MEZ Country Indicator Last
08:30 SZ Consumer Prices (September, y/y) -1.4%
09:15 SP IHS Markit PMI Manufacturing (September) 49.9
09:30 SZ PMI Manufacturing (September) 51.8
09:45 IT IHS Markit PMI Manufacturing (September) 53.1
11:00 EZ Unemployment Rate (August) 7.9%
14:30 US Consumer Spending (August, m/m) +1.9%
14:30 US Personal Income (August, m/m) +0.4%
14:30 US PCE Core(inflation)indicator (August, y/y) +1.25%
16:00 US ISM PMI Manufacturing 56.0

Earnings Calendar October 6

Country Corporate Period
SZ Aryzta Y


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US employment growth remains dynamic at the beginning of the year