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LGT Navigator: Impulse-driven stock market environment

October 26, 2021

While the corporate reporting season is getting into full swing and providing investors with fresh impetus, stock market sentiment remains weighed down by economic and inflation fears. Problems in global supply chains are clouding the business environment for companies, as the latest Ifo survey results showed. Meanwhile, in Washington, Democrats are fighting for the introduction of a US wealth tax to finance the expansion of social security and the fight against climate change. The focus now also shifts to the monetary policy meetings of the ECB and the Bank of Japan on Thursday.

Impulse-driven stock market environment

Europe's stock markets failed to make much headway at the start of the week, weighed down by ongoing inflation concerns and rising Covid-19 risks. In New York, however, the Dow and the broad S&P 500 continued their record chase after an initially weak start. The Dow Jones Industrial closed +0.18% higher at 35'741.15 points and the S&P 500 went out at the end of the day with a plus of +0.5% at 4'566.48 points. It went even better on the technology exchange Nasdaq where the indices posted daily gains of about one percent.

Facebook delivered a solid quarterly result after the close of the stock market. The advertising business of the world's largest online network was running at full speed even during the crisis. In Q3, ad revenues increased by around +30% year-on-year to USD 28.3 billion. While revenue was below market expectations, Facebook exceeded profit forecasts. More results from big tech stocks are now eagerly awaited over the course of the week: today from Microsoft, Twitter and Alphabet, and later in the week from Apple and Amazon.

US Democrats to present tax plans

Democrats in Washington already want to present their fiscal package “Build Back Better Plan” by the end of this week. US President Joe Biden, meanwhile, appears ready to forgo an increase in corporate income tax and higher income and capital gains tax rates to offset the billion-dollar package. However, the tax burden on American companies could still rise because of an increase in the levy on foreign earnings (GILTI), a minimum tax of 15% or a levy on share buybacks.

Business climate deteriorates in Germany

The monthly survey by the Munich-based economic research institute Ifo highlights the extent to which companies are currently struggling under the problems in global supply chains and the procurement of materials. The business climate barometer fell more sharply than analysts had expected, from 98.9 to 97.7 points, marking the fourth consecutive decline in October. Business expectations deteriorated. The corresponding subindex fell to its lowest level since February. “Sand in the gears of the German economy is hampering the recovery,” was how Ifo commented on the latest survey results.

Bundesbank expects economy to weaken in final quarter

According to the central bank, the German economy is likely to have grown more strongly in the third quarter than in Q2 (+1.6%), but to lose considerable momentum in the fourth quarter. In its monthly report published yesterday, the Bundesbank also expects inflation rates to continue to rise at least into next year.

Economic Indicators October 26

MEZ Country Indicator Last period
15:00 US S&P/CaseShiller House Prices 20-biggest cities (August, y/y) +19.9%
16:00 US Consumer Confidence (October) 109.3
16:00 US New Home Sales (September, m/m) +1.5%

 

Earnings Calender October 26

Country Company Period
SZ UBS Q3 
SZ Novartis Q3 
SZ Logitech Q3 
SZ Bucher Q3
SZ SIG Combibloc Q3
NL KPN Q3
UK Reckitt Benckiser Q3
US Alphabet Q3
US Microsoft Q3
US Twitter Q3
US Visa Q3
US Texas Instruments Q3
US Eli Lilly Q3
US 3M Q3
US General Electric Q3
US UPS Q3

 

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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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