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LGT Navigator: Focus on positive news – tech heavyweights drive recovery rally

April 29, 2022

Good quarterly figures from some tech heavyweights provided a boost and a recovery on Wall Street. From an economic perspective, it had to be noted that the US economy contracted in the first quarter, but private consumption and investment remained relatively solid. Today, GDP and inflation figures are also the focus of attention in Europe. However, the burdening factors such as the tightening of monetary policy, continuing high inflationary pressure, geopolitical uncertainties, in particular the war in Ukraine, and concerns about energy supplies remain - stock market voices will therefore continue to fluctuate between optimism and pessimism.

Focus on positive news – tech heavyweights drive recovery rally

On the New York Stock Exchange, stock indices rose sharply on Thursday, driven by well-received corporate news. In quite volatile trading, the Dow Jones Industrial closed +1.85% higher at 33'916.39 points and the market-wide S&P 500 even went out of the day's business with a solid plus of +2.47% at 4'287.50 points. The strongest gains were observed on the technology exchange Nasdaq, where the indices recovered from the previous day's losses and increased by about +3.5%. The recovery was driven by quarterly figures of some tech heavyweights, such as Facebook parent Meta. The share of the social media platform increased at times by around +18%.

Apple reported strong quarterly figures after the close of the stock market. The iPhone group earned with USD 25 billion almost +6% more than in the previous year and increased sales for the year by +9% to USD 97.3 billion. Apple thus exceeded market expectations, but the share price turned negative by around one percent in after-hours trading after initial gains.

The positive guidance from the US also provided Asia's stock markets at the end of the week for partly strong gains. In Tokyo, the 225-stock Nikkei index rose by around +1.7% and in Hong Kong, the Hang Seng index gained almost +4%. 

Negative first quarter for the US economy, but consumer spending remains solid

US gross domestic product (GDP) surprisingly contracted at an annualized rate of -1.4% in the first three months of the year. A sharp widening of the trade deficit was mainly responsible, while consumption and business investment remained robust. Economists had forecast an annualized growth rate of at least +1.0%. In the final quarter, the US economy had still grown by almost seven percent.

Sweden's central bank raises key interest rate

The Swedish central bank is tightening its monetary policy and has increased the key interest rate by a quarter of a percentage point to +0.25%. This means that the key interest rate is back in positive territory for the first time since 2014. The background to this is increasing inflationary pressure. In Sweden, the annual inflation rate reached its highest level since the 1990s in March. The Riksbank is therefore holding out the prospect of further interest rate hikes.

Inflation in Germany higher again

In Germany, consumer prices rose by +7.4% in April compared with the same period a year earlier. Due to the massive rise in energy prices, the rate of inflation was thus once again higher than the March rate of +7.3%. German households had to pay around +35% more for household energy and fuel in April than in the same month a year earlier. Food prices rose by an average of +8.5%. Current forecasts predict that the inflation rate in Germany will exceed six percent in 2022. By way of comparison, inflation in Germany averaged +3.1% for the year 2021.

The stronger than assumed inflationary pressure in the euro zone is also increasingly increasing the pressure on the European Central Bank (ECB) and heating up the discussion about the timing of the interest rate turnaround. In recent statements, ECB President Christine Lagarde and other high-ranking ECB officials held out the prospect of a first increase in key interest rates in the summer. Lagarde stressed that the ECB's mandate is price stability and to guarantee this, the ECB could very likely phase out its multi-billion bond purchases at an early stage. This would then be the time to consider raising interest rates.

Slight easing of inflation in Spain

In Spain, inflationary pressure eased more than expected in April. Compared with a year earlier, the cost of living increased by +8.3%. This is significantly lower than the +9.8% recorded in March. Analysts had on average expected a decline to 9.0%. The background to the slight easing was slightly lower electricity costs.

  

Economic Indicators April 29

MEZ Country Indicator Last period
07:30 FR GDP Q1 (q/q) +0.7%
08:45 FR Consumer Prices (April, y/y) +5.1%
09:00 SZ KOF Economic Indicator (April) 99.7
09:00 ESP GDP Q1 (q/q) +2.2%
09:00 AUT GDP Q1 (q/q) -1.5%
09:00 AUT Consumer Prices (April, y/y) +6.7%
10:00 IT GDP Q1 (q/q) +0.6%
10:00 SZ SNB President Jordan speaks
10:00 GE GDP Q1 (q/q) -0.3%
11:00 IT Consumer Prices (April, y/y) +6.8%
11:00 EZ Consumer Prices (April, y/y) +7.4%
11:00 EZ Core Consumer Prices (April, J/J) +2.9%
11:00 EZ GDP Q1 (q/q) +0.3%
14:30 US Consumer Spending (March, m/m) +0.2%
14:30 US Personal Income (March, m/m) +0.5%
15:45 US Chicago PMI (April) 62.9
16:00 US Consumer Sentiment (April) 59.4

 

Earnings Calender April 29

Country Company Period
GE BASF Q1
FR Remy Cointreau Q1 
IT Eni Q1
NL Sigify Q1 Sales
NL KPN Q1 
ESP BBVA Q1
AUT OMV Q1
AUT Erste Group Bank Q1 
DNK Danske Bank Q1
SWE Electrolux Q1 
SWE Vattenfall Q1
UK AstraZeneca Q1
UK Reckitt Benckiser Q1
US Bristol Myers-Squibb Q1
US Chevron Q1
US ExxonMobil Q1
US Colgate-Palmolive Q1

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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