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LGT Navigator: Investors show cautious reaction to quarterly figures

October 14, 2020

Although the first major US banks presented good figures for the third quarter, the mood on Wall Street remained subdued. Even Apple's new iPhone did not trigger any enthusiasm among investors for the time being. The International Monetary Fund is slightly more optimistic about the economic outlook than in spring.

US Banks Earnings

After weak US stock market performance, the majority of Asian stock markets are also trading in the red on Wednesday. The Shanghai Composite slips more than 0.7% and the Hang Seng in Hong Kong loses 0.3%. In Tokyo, the Nikkei is barely in the profit zone. 

Despite good quarterly earnings from various large corporations, the mood on Wall Street remained subdued on Tuesday. The S&P 500 and the Dow Jones Industrial each lost around 0.6% by the end of trading. The Nasdaq 100 technology index closed unchanged. The focus was on the figures of the major banks JPMorgen Chase and Citigroup, which clearly exceeded market expectations. Nevertheless, the shares ended trading with losses. The pharmaceutical group Johnson & Johnson also managed to impress with its quarterly results. However, the shares came under pressure because the company had to interrupt a study on its corona vaccine after a participant fell ill. The presentation of Apple's new iPhone (-2.6%) caused little enthusiasm. One year after rivals Samsung and Huawei launched a 5G-capable smartphone, Apple is now catching up.

IMF revises growth expectations upwards

The International Monetary Fund (IMF) has significantly raised its forecast for the global economy. Economists expect global output to shrink by 4.4% in the current year. In June, the IMF had predicted a decline of 5.2%. The global economy is expected to return to a growth path in 2021 (+5.2%). Especially in the industrial nations the situation is less bad than feared in spring, the IMF explains. But also China has recovered surprisingly quickly thanks to the tough lockdown measures, which is why the IMF expects the economy to grow 1.9% in 2020 

ZEW index collapses

Due to the rising number of corona infections, stock market professionals are once again taking a more pessimistic view of the prospects for the German economic development. The ZEW index, which tracks analysts' economic expectations, surprisingly fell by 21.3 points to 56.1 points in October. In addition to the spread of the pandemic, the uncertainty surrounding the Brexit negotiations and the upcoming US presidential elections is also weighing on sentiment. German gross domestic product fell by 9.7% in the second quarter. Economists have predicted a recovery for the second half of the year, but should a second wave of corona lead to further restrictions for the economy, this should dampen the upturn.

British unemployment rate rising

In the UK, unemployment has risen more than expected. In the period from June to August the unemployment rate climbed to 4.5% (from 4.1% from May to July), the highest level in more than three years. At the same time, the number of people in employment fell by 153,000, while economists had expected only 30,000 fewer. The Bank of England expects unemployment to rise to 7.5% by the end of the year, as the government will cut back its $50 billion job protection program in November. 



Economic Indicators October 14

MEZ Country Indicator Last
06:30 JP Industrial production (August) 1.7%
11:00 EZ Industrial production (August) 4.1%
14:30 US Producer prices (September) 0.3%
20:00 US Beige Book 73.9

Earnings Calendar October 14

Country Corporate Period
US Bank of America Q3
US Goldman Sachs Q3
US Wells Fargo Q3


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Source: LGT Bank (Switzerland) Ltd.

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US employment growth remains dynamic at the beginning of the year