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LGT Navigator: Investors remain cautious

May 19, 2021

Weak US construction data weighed on stock market sentiment on Tuesday. The spending spree of Americans after the corona pandemic resulted in strong quarterly figures for US department store chains. Meanwhile, the International Energy Agency (IEA) warns that investments in new oil and gas exploration projects must be halted immediately if climate targets are still to be met.

Shopping boom

US stock markets have extended the losses on Tuesday. The S&P 500 lost -0.9% to 4127.83 points and the Dow Jones declined -0.8% to 34'060.66 points. The Nasdaq 100 fell -0.7% to 13'217.68 points. Sentiment was dampened by unexpectedly weak data from the construction industry. Thus, the number of housing starts in April fell within the month by -9.5%. Analysts had forecast a decline of only -2%. In addition, fewer building permits were issued, which is considered an indicator of future construction activity. In focus today are the minutes of the last interest rate meeting of the Federal Reserve.

In Asia, stock markets are trading mixed on Wednesday. In Tokyo, the Nikkei loses -1.6% and the Shanghai Composite trades -0.6% lighter. In Hong Kong, the Hang Seng gains +1.4%.

Shopping boom in the US

US department stores have released surprisingly good quarterly earnings on Tuesday. Thus, Walmart, the largest US retailer, and the long-established retailer Macy's have raised their annual targets. The stores are benefiting from the fact that people are once again being drawn outside to do their shopping following the easing of the protective measures. The trillion-dollar aid programs enacted by the US government provide additional support, as part of it is distributed directly to households in the form of checks. The development should provide some relief for conventional American retailers, which have come under heavy pressure in recent years as not all suppliers have managed to catch up with the digital world. The home improvement business is also going strong, as evidenced by Home Depot's quarterly results: the DIY chain significantly increased sales year-on-year.

IEA: achieving climate targets requires strict action

The International Energy Agency (IEA) warned Tuesday that investments in new fossil fuel exploration projects must be stopped immediately if global carbon emissions are to fall to net zero by 2050. In its latest report ”Net Zero by 2050“, the Paris-based energy watchdog notes that more and more governments are pledging to reduce CO2 emissions to zero. However, commitments to date – even if fully implemented – would fall far short of what is needed to achieve the zero goal by 2050. But this is crucial to limit the global temperature rise to 1.5 degrees Celsius above pre-industrial levels, as agreed in the Paris Climate Agreement. The IEA lists various measures it considers necessary to reach the target after all and advocates, among other things, a halt to the sale of combustion-engine vehicles by 2035 and a massive expansion of investment in wind and solar energy.

Lawsuit against ECB bond purchases fails

The German constitutional court in Karlsruhe has rejected renewed lawsuits against the purchase of government bonds by the European Central Bank (ECB). The court ruled that the lawsuits were inadmissible and unfounded. The focus was on the PSPP (Public Sector Purchase Programme) bond-buying program launched by the ECB in early 2015 to boost the European economy. The judges in Karlsruhe had declared the program partially unconstitutional in May 2020 and called on the German government and the Bundestag to examine the proportionality of the multi-billion euro purchases. The government bodies complied with this obligation and completed the relevant reviews by July 2020. The new lawsuits had criticized the implementation of the Karlsruhe ruling – now the constitutional court has concluded that there is no basis for this. This means that the Bundesbank can continue to participate in the ECB's bond purchases.

Economic Indicators May 19

MEZ Land Indikator Letzte Periode
08:00 GB Consumer price index (April, y/y) +0.7%
11:00 EZ Consumer price index (April, y/y) +1.6%
20:00 US FOMC minutes

Earnings Calender May 19

Land Unternehmen Periode
CH Julius Bär Q1

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