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LGT Navigator: Every correction attracts buyers again

February 2, 2021

On stock markets, every correction seems to immediately attract buyers again, because there is no lack of liquidity on capital markets thanks to the expansive stance of the central banks and the expansion of fiscal measures to contain the corona crisis. Thus, the recent slump on equity markets was followed by a solid start to the week. The uncertainty caused by the recent turbulence surrounding the battle between private speculators and hedge funds seems to have subsided. The latest purchasing managers' figures from the industrial sector showed a slowdown at the beginning of the year, but industry remains on a growth course. In Washington, meanwhile, the wrangling over another corona stimulus package continues. Today, the quarterly results of the stock market heavyweights Alphabet (Google), Amazon or Pfizer are expected with excitement.

Every correction attracts buyers again

After the losses in the previous week, the indices on Wall Street recovered at the beginning of the week and the Dow Jones Industrial gained +0.76% to 30'211.91 points. For the S&P 500, it went even more clearly uphill. The broad market index closed +1.61% higher at 3'773.86 points. In particular, tech stocks were in demand and so the technology exchange Nasdaq recorded the strongest daily gains with about +2.5%.

Meanwhile, the struggle for a new corona aid package continues in Washington. So far, however, US President Joe Biden and the Democrats have not yet been able to reach an agreement with the Republicans in the Senate. Over the weekend, ten Republican senators submitted an alternative proposal to Biden's intended stimulus package. This envisages aid of around USD 600bn – significantly less than the USD 1.9 trillion put forward by Biden.

In Asia, most indices this morning followed the positive guidance from overseas and also for Europe's stock exchanges, the futures indicate a friendly start to trading.

Recovery in the industrial sector loses momentum on both sides of the Atlantic

According to the latest survey data, industrial companies in the euro area were somewhat more cautious than at the end of last year. The Purchasing Managers' Index for eurozone industry fell by 0.4 points to 54.8 in January compared with the previous month, the London-based market research institute IHS Markit confirmed. While the industry remains on track for growth, it is at its lowest rate since the start of the recovery in light of corona restrictions and supply bottlenecks, commented Markit chief economist Chris Williamson. In the UK, sentiment among surveyed industrial firms dipped in January from a three-year high in December. As a result, the UK industrial barometer fell sharply by 3.4 points from the previous month to 54.1, but was still clearly stronger than an initial estimate of 52.9 points. Despite Brexit and the tense pandemic situation on the island, the industrial sector remains on a growth path with a PMI value clearly above 50 points.

In the US industrial sector, growth strengthened somewhat at the beginning of the year, according to the evaluations of IHS Markit. The corresponding PMI rose from 57.1 to 59.2 points. The US industry has shown an encouraging start to the year, said IHS Markit chief economist Williamson. The monthly business survey by ISM, the industry association of US purchasing managers, came to a different conclusion. According to the survey, US manufacturing activity was said to have slowed in January. The ISM manufacturing PMI fell from 60.7 to 58.7 points. Analysts had anticipated a decline to 60.0 points here.

Corona aid and short-time work keep unemployment in the euro area in check

The unemployment rate in the eurozone remained unchanged in December compared with the previous month at 8.3%. According to the statistics office Eurostat, the effects of the corona crisis on the eurozone labor market have so far been limited. During the euro debt crisis in 2009, for example, the unemployment rate had risen to as high as 12%. During the pandemic, the previous peak was reached in June last year at 8.7%. The negative effects of the corona measures on the economy and the labor market are being contained in particular by government support programs and short-time work. According to Eurostat, 13.67 million people in the eurozone were without permanent employment at the end of last year. In the EU as a whole, the figure was around 16 million.

 

 

Economic Indicators February 2

MEZ Country Indicator Last
08:45 FR Consumer Prices (January, y/y) 0.0%
10:00 IT GDP Q4 (q/q) +15.9%
11:00 EZ GDP Q4 (q/q) +12.7%
11:00 EZ Core Consumer Prices (January, y/y) +0.2%

Earnings Calendar February 2

Country Corporate Period
UK BP Q4
US Alphabet Q4
US Amazon Q4
US Pfizer Q4
US Amgen Q4
US Exxon Mobil Q4
US UPS Q4

 

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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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US employment growth remains dynamic at the beginning of the year