Against the backdrop of robust economic data, investors increasingly relied on positive stimuli. The market-wide S&P 500 reached a new high of 4'194 points on Friday, after the day before the tax increases planned by US President Biden had caused losses. The S&P 500 closed +1.09% higher at 4'180.17 points. The benchmark Dow Jones Industrial index rose +0.67% to 34'043.49 points but gave up almost half a percent for the week. On the Nasdaq technology exchange, the indices gained about +1.3% at the end of last week. Solid economic data had a positive impact. On the one hand, the latest purchasing managers' surveys signal a continuing recovery trend in the economy – not only in the US, but also in Europe. Current data also showed that sales of new homes in the US rose much more strongly than expected in March. Compared to the previous month, new home sales increased by +20.7%. Annualized, 1.02 million new homes were sold in March – the highest level since 2006.
In Asia, the positive trend on the equity markets continued for the most part at the start of the week. The focus is now primarily on the monetary policy decision of the Bank of Japan on Tuesday and the Federal Reserve on Wednesday evening. The BoJ and the Federal Reserve are likely to reaffirm their expansionary stance but could also send signals as to when a turnaround in interest rates could be expected in view of the ongoing recovery of the global economy. US President Joe Biden's first State of the Union address on Thursday is also likely to be followed with great interest.
Business sentiment in the private sector brightened in the US and the euro area in April, according to the latest survey data from London-based IHS Markit. Growth in the US services and industrial sectors accelerated in the current month. Accordingly, IHS Markit's Purchasing Managers' Index (PMI Composite) for both economic sectors rose from 59.7 points in March to 62.2 points in April. At 60.6 and 63.1 points, the individual PMIs for the US industrial and service sectors, respectively, are significantly above the growth threshold of 50 points. According to IHS Markit Chief Economist Chris Williamson, the American economy has started the second quarter strongly and the recovery is broad-based.
In the euro area, IHS Markit's Purchasing Managers' Index (composite PMI) signaled an improvement in the assessment of companies surveyed in the private sector and the strongest growth since July 2020, rising from 53.2 points in March to 53.7 points in April. Analysts had expected a dip to 52.9 points in view of the tighter measures in many places. On a more positive note, the PMI for the services sector, which has been particularly battered by the pandemic, indicated a return to growth at 50.3 (up from 49.6 in March). IHS Markit Chief Economist Chris Williamson commented: the eurozone is encouragingly showing strength.
Economists regularly surveyed by the European Central Bank (ECB) (Survey of Professional Forecasters) forecast significantly stronger inflationary pressures in 2021. Accordingly, consumer price inflation in the eurozone will amount to +1.6% in the current year (previous forecast +0.9%) but will then fall back to an average of +1.3% (unchanged) in 2022. For 2023, inflation is expected to remain unchanged at +1.5%. Regarding core inflation, i.e. excluding energy, food, alcohol and tobacco, the forecast was +1.1% for the current year (previously +0.8%), +1.1% for 2022 (unchanged), and +1.4% for 2023 (previously +1.3%). At the same time, economists revised their forecasts for economic growth in the euro zone for 2021 slightly downward, from +4.4% previously to +4.2%. At the same time, however, the forecast for 2022 was raised from +3.7% to 4.1%.
The pandemic and the countermeasures caused a significant increase in new debt in the UK last year. At around 303bn (EUR 349bn), new borrowing reached its highest level since the data series began in 1947! The deficit ratio (new borrowing in relation to economic output) climbed to 14.5% and the debt ratio (total debt to economic output) rose to 97.7%, the highest level since the early 1960s. At the same time, tax revenues decreased by GBP 34.2bn to GBP 523.6bn, while government spending increased by GBP 203bn to just under GBP 942bn.
|10:00||GE||Ifo Business Climate Survey (April)||96.6|
|14:30||US||Durable Goods Orders (March, m/m)||-1.2%|
|SZ||Kuehne & Nagel||Q1|
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Source: LGT Bank (Switzerland) Ltd.
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