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LGT Navigator: Investors take some chips from the table

August 12, 2020

Profit taking ended the rally on Wall Street yesterday. While stock prices were initially driven by the reduction in capital gains tax, which US President Donald Trump brought into play , the US stimulus package anticipated by investors remains controversial in Washington and an agreement does not yet seem to be in sight. Highly controversial is also the Covid-19 vaccine announced by Russia. Meanwhile, Democratic candidate Biden set a first highlight in the US presidential election campaign with the election of Kamala Harris as vice-president.

Investors take some chips from the table

On the New York Stock Exchange, the most recent price rally initially continued, but was then weighed down primarily by profit-taking and the still faltering negotiations on the new US economic stimulus package. At the start of trading, the Dow Jones Industrial broke through the 28 000 mark for the first time since the end of February, but then closed -0.38% lower at 27 686.91 points. The S&P 500 fell by -0.8% to 3 333.69 points and the technology-heavy Nasdaq 100 index even dropped by -1.9%. Profit taking also dominated gold trading. The price of a troy ounce fell about -2% below the USD 1 900 mark after a slide of over -5% yesterday, while US Treasury yields rose. Asian stock markets, with the exception of the Japanese stock market, were weaker today. The Nikkei rose by +0.21% to 22 799.12 points. Japanese equities benefited from a slightly weaker yen, which at times reached a three-week low against the US dollar.

Biden puts Kamala Harris on the Democratic presidential ticket

The designated Democratic presidential candidate Joe Biden (78) chose Senator Kamala Harris (55) as his running mate. The former California state attorney would not only be the first woman, but also the first black woman, as well as the first American with Asian roots, to hold this office. The two candidates are to be officially nominated at a party congress of the Democrats over several days next week.

Increased inflationary pressure in the US in the short term

Price pressure in the United States increased more than expected in July. At the producer level, prices rose by +0.6% month-on-month, the strongest increase since October 2018, as analysts had expected only half as much. The rise in prices was mainly driven by higher energy prices. On the other hand, the data for the year as a whole show that the inflation trend is moderate given the recessionary economic environment in the midst of the corona crisis. Producer prices fell by -0.4% year-on-year and rose by only +0.1% in the core rate, i.e. excluding the often volatile prices for food and energy. Producer prices provide an early indication of inflationary developments, as producer prices usually spill over to consumer prices sooner or later. An indication of this is provided by the US consumer price data due this afternoon.

ZEW survey confirms positive economic expectations

In the monthly survey conducted by the Mannheim Centre for European Economic Research (ZEW), the financial market experts and institutional investors surveyed were optimistic about an expected economic recovery in Germany. The ZEW Expectations Index rose more strongly in July, by 12.2 points to 71.5 points, reaching its highest level since January 2004. Meanwhile, however, the current uncertainty remains noticeable, which is reflected in a decline of the indicator for the assessment of the current economic situation. According to the ZEW, hopes for a rapid economic recovery have increased.

Sputnik V: ­­controversial first approval worldwide for Covid-19 vaccine

Russia is the first country in the world to approve a vaccine against the coronavirus SARS-CoV-2. The vaccine, called “Sputnik V“, was developed by the Gamaleya Institute in Moscow and has only recently been tested on humans. The vaccine is effective and safe, confirmed Kremlin chief Vladimir Putin. The World Health Organization (WHO) stated that it is in close contact with the Russian health authorities about a possible “prequalification process“ for the vaccine. However, a strict review was necessary. According to the WHO, 167 Covid-19 vaccine projects are under development worldwide, 28 of which are in clinical trials in humans. Six of these projects are in the crucial third and final phase.

Corona crisis also causes economic slump in Russia

The pandemic and the countermeasures taken left a clear mark on Russia's economy. In the second quarter, GDP collapsed by -8.5% year-on-year, which was roughly in-line with the expectations of most economists. The Russian central bank expects economic output to decline by as much as -5.5% this year, followed by a recovery next year.

 

 

Economic Indicators August 12

MEZ Country Indicator Last
10:30 UK Industrial Production (June, y/y) -20.0%
11:00 EZ Industrial Production (June, y/y) -20.9%
14:30 US Consumer Prices (July, m/m) +0.6%
14:30 US Consumer Prices (July, y/y) +0.6%
14:30 US Core Consumer Prices (July, y/y) +1.2%

Earnings Calendar August 12

Country Corporate Period
GE E.ON Q2
US Cisco Systems Q4

 

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Imprint
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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