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LGT Navigator: Inflation concerns return to center stage

December 10, 2021

With today's eagerly awaited latest US consumer price data, inflation expectations are once again increasingly moving to the center of capital markets. At +6.2%, the inflation rate in the United States reached its highest level in around 30 years in November and is thus increasingly causing concern even among the Federal Reserve. In addition to the question of how sustainable the inflationary pressure will be, the noticeably worsening pandemic situation and the fear of more drastic countermeasures are also keeping investors on their toes.

Inflation concerns return to center stage

On Wall Street, the previously sought-after technology stocks were under pressure yesterday. On the Nasdaq, the indices lost about -1.5%. If inflation turns out to be more sustainable and the US Federal Reserve pushes the reduction of liquidity or the interest rate turnaround, this will hit the interest rate-sensitive tech stocks. However, standard stocks also posted losses on Thursday. The S&P 500 lost -0.72% and closed at 4'667.45 points. The Dow Jones Industrial ended the trading day unchanged at 35'754.69 points. The uncertain impact of the corona variant Omicron also continues to provide nervousness.

In Asia, stock markets also tend to the majority in negative territory at the end of the week. In addition to the expected US inflation data and the uncertainties surrounding the pandemic, the Chinese real estate group Evergrande was once again in the spotlight. This after the rating agency Fitch downgraded the highly indebted company as well as its competitor Kaisa Group. In addition, China's central bank chief Yi Gang signaled that the government would not rush to Evergrande's aid with bailout measures. “Evergrande's risks should be dealt with appropriately according to the principles of the market and the rule of law,” the People's Bank of China chief said. He said the short-term risks of individual property companies would not affect normal financing in the market in the medium and long-term.

Price pressure remains high in China

In China, consumer prices rose +2.3% for the year in November – the highest inflation rate since August 2020, up from +1.5% in October. Prices also continue to rise strongly at the producer level. In November, producer price inflation was +12.9%, slightly lower than in October, when it was +13.5%, the highest rate in 26 years. Meanwhile, the government is trying to contain the rise in producer prices with some measures such as interventions in commodity markets.

Short-term data confirm positive outlook for US labor market

Weekly initial jobless claims in the US fell to their lowest level since 1969. Compared with the previous week, the number of claims fell by 43'000 to 184'000 in the week ended December 4. The four-week moving average, which is more informative of the trend, also decreased significantly from the previous week by 21'250 to 218'750.

Biden's democracy summit more than just lip service?

US President Joe Biden appealed to the 111 countries invited by the White House to the “Summit for Democracy” to strengthen democracy and invest. For this purpose, the US would invest about USD 420 million in the coming year in various existing or new democracy-promoting projects. This would be used, for example, to support freedom of the press worldwide or to fight corruption, he said. “Free and independent media are the foundation of democracy,” Biden said. In addition, investments are to be made, for example, in the use of digital technologies, against authoritarian censorship of the Internet or in the promotion of the political leadership role of women as well as in the defense of free and fair elections. The virtual summit is likely to put additional strain on Washington's relationship with China, after the US and other democratic countries announced a diplomatic boycott of the Winter Olympics in Beijing.

Economic Indicators December 10

MEZ Country Indicator Last period
08:00 UK Industrial Production (October, m/m) -0.4%
08:00 GE Consumer Prices (November, y/y) +6.0%
10:00 IT Industrial Production (October, m/m) +0.1%
14:30 US Consumer Prices (November, m/m) +0.9%
14:30 US Consumer Prices (November, y/y) +6.2%
14:30 US Core Consumer Prices (November, y/y) +4.6%
16:00 US Consumer Sentiment University Michigan (December) 67.4


Earnings Calender December 10

Country Company Period
GE Daimler Truck Initial Listing
UK Anglo American Investor Update


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