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LGT Navigator: Jackson Hole – assessment for Fed and financial markets

August 26, 2022

Today at 4:00 p.m. (CET), Federal Reserve Chairman Powell will provide insight into the Fed's assessment of inflation, the economy and the further development of interest rates at the central bank symposium in Jackson Hole. In the run-up to the event, the sentiment on the trading floor remained nervous and Powell's statements could cause immediate and possibly strong reactions on the financial markets. The assessments of the Fed Chairman represent not only a location determination for the Federal Reserve regarding the question of whether – at least in the US – the peak of inflation has already been reached and therefore the interest rate screw can be tightened more cautiously but could also set an important course on capital markets.

Jackson Hole – assessment for Fed and financial markets

On Wall Street, cautious optimism prevailed on Thursday and investors are now eagerly awaiting the speech of the Fed Chairman on the economic outlook and the corresponding further direction and, above all, the pace of the Fed's interest rate policy. The Dow Jones Industrial closed with a solid daily gain of almost one percent at 33,291.78 points and the broad S&P 500 finished +1.41% firmer at 4,199.12 points. The strongest gains saw the Nasdaq, where the indices rose by about +1.75%. In bond markets, the yield on ten-year US government bonds remained above the 3% mark (currently 3.05%), while the US dollar held the euro below parity (currently 0.9965).

Equities in the Asia-Pacific region joined the positive guidance from overseas and showed some moderate gains at the end of this week. The Japanese Nikkei 225 rose by +0.6% and in Hong Kong, the Hang Seng index gains around +0.7%. In mainland China, the Shanghai Composite traded only slightly higher (+0.2%). The MSCI index for the Asia-Pacific region outside Japan rose by about +0.7%.

US economy performed better than expected in the second quarter

The US economy performed somewhat better than initially thought in the period from April to June. According to revised data, GDP contracted at an annualized rate of -0.6% compared with the previous quarter. An initial estimate had been for an annualized decline of -0.9%. In the first quarter, the world's largest GDP had already contracted by an annualized -1.6%, which means that the US economy is theoretically already in recession.

On a positive note, the number of initial jobless claims also declined, whereas analysts had expected an increase.

Ifo business climate barometer falls to two-year low

Companies in Germany are taking a more negative view of their business situation, according to the latest survey results from the Munich-based Ifo Institute. The highly regarded business climate barometer fell for the third month in a row in August, reaching 88.5 points (previous month 88.7), its lowest level since June 2020. Analysts, however, had expected an even greater gloom and had forecast an index level of 86.8 points. In particular, the approximately 9,000 companies surveyed were again slightly more pessimistic about the outlook. The mood in the German economy is generally poor due to a high degree of uncertainty and points to a decline in economic output in the third quarter, commented Ifo President Clemens Fuest.

Economic Indicators August 26

MEZ Country Indicator Last period
08:00 GE GfK Consumer Climate (September) -30.6
08:45 FR Consumer Sentiment (August) 80.0
10:00 IT Business Climate (August) 106.7
10:00 IT Consumer Confidence (August) 94.8
14:30 US Consumer Spending (July, m/m) +1.1%
14:30 US Personal Income (July, m/m) +0.6%
14:30 US PCE Core Rate Price Index (Fed Inflation Indicator) (July, y/y) +4.6%
16:00 US Fed Governor Powell speaks at Jackson Hole Symposium
16:00 US Consumer Sentiment (August) 55.1


Earnings Calender August 30

Country Company Period
SZ Givaudan H1
GE DZ Bank H1
US Best Buy Q2
US Hewlett-Packard Q3


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