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LGT Navigator: Inflation concerns dominate market sentiment

November 10, 2021

Against the backdrop of persistently rising inflationary pressure, stock investors were more cautious and took advantage of the high levels by taking profits. At the same time, US government bond yields increased. The latest data on US consumer prices are eagerly awaited today. A sharp rise in producer prices in the US and China point to continued and strong inflationary pressures.

Inflation concerns dominate market sentiment

The Dow Jones Industrial gave up -0.31% to 36'319.98 points at the close. The S&P 500 declined -0.35% to 4'685.25 points. The focus was on the shares of electric car maker Tesla, which slumped almost -12% on Tuesday. Earlier, most European stock indices had also fallen, overall, however, from a high level. The EuroStoxx 50 closed -0.18% lower at 4'344.63 points. In Asia, the stock markets tended to the midweek negative and before this afternoon's consumer price data from the US, the same picture is likely to be expected today on Europe's stock markets.

Strongest rise in producer prices in China in 26 years

In China, the price level at the producer level reached its highest level since 1995 in October. In view of the energy shortage and sharply rising coal prices, producer prices (PPI) rose by +13.5% year-on-year (analysts' consensus +12.4%) and thus more strongly than in September (+10.7%).

Inflationary pressure from producers also increasing in the US

Producer prices in the United States rose strongly in October. On an annual basis, prices rose by +8.6% at producer level and by +0.6% month-on-month. The price increase was driven by persistently higher transportation costs due to disrupted supply chains, as well as by higher energy and raw material prices. Excluding energy prices, the core rate rose +6.2% in October. The rise in producer prices partially feeds into consumer prices with a time lag and is therefore considered a leading indicator for inflation developments. The latest US consumer prices are eagerly awaited this afternoon.

ECB should brace for higher inflation, council member warns

According to ECB Council member Klaas Knot, the inflation rate in the euro area should fall back below the two percent mark by the end of next year, but the ECB should prepare for a less favorable scenario, he said. From today's perspective, rising inflationary pressures are “largely transitory in nature,” Knot said. However, the driving factors, such as bottlenecks in supply chains or energy price increases, could well be more permanent than previously assumed. The ECB must therefore also prepare for upside scenarios, the Dutch central bank chief said.

More optimistic economic assessment by German financial professionals

The economic expectations of analysts and investors regularly surveyed by the Mannheim-based economic research institute ZEW brightened unexpectedly in November. The expectations barometer increased by 9.4 points to +31.7 points, after the index had previously fallen for five months in succession. The result is significantly better than the consensus expectation of +20.0 points. While the outlook for the German economy is assessed more optimistically, the assessment of the current economic situation clouded over more than expected in November. The survey results for the eurozone mirrored this assessment. According to the ZEW, the financial market professionals surveyed expect supply bottlenecks for raw materials and intermediate products as well as the high inflation rate to continue to weigh on economic development in the current quarter.

Economic Indicators November 10

MEZ Country Indicator Last period
08:00 GE Consumer Prices (September, y/y) +4.6%
10:00 IT Industrial Production (September, m/m) -0.2%
14:30 US Consumer Prices (October, m/m) +0.4%
14:30 US Consumer Prices (October, y/y) +5.4%
14:30 US Core Consumer Prices (October, y/y) +4.0%
14:30 US Initial Jobless Claims 281,000


Earnings Calender November 10

Country Company Period
SZ Barry Callebaut
GE Allianz Q3 
GE Adidas Q3
GE Continental Q3
GE Infineon  Year
AUT Voestalpine Q3
NL Ahold Delhaize Q3
FR Engie Q3
FR Alstom Q3
UK Marks & Spencer Q3
USA Walt Disney Q3


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Source: LGT Bank (Switzerland) Ltd.

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