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LGT Navigator: Jackson Hole central bank meeting in focus

August 23, 2021

Investors seem to have put several negative implications behind them for the time being and took the opportunity to buy after a weak last week. Thus, the start into the new week looks quite promising, although sentiment is likely to remain fragile due to the recently concocted cocktail of worries. On capital markets, the focus is now likely to be on the high-level central bank meeting in Jackson Hole from August 26 to 28.

Jackson Hole central bank meeting in focus

On Wall Street, the indices went into the weekend with clear gains after a weak last week. The Dow Jones Industrial gained +0.65% to 35,120.08 points on Friday, ending a four-day losing streak. For the week, the Dow posted a loss of just over one percent. The S&P 500 closed +0.81% higher at 4,441.67 points and the technology exchange Nasdaq was up about one percent. In Asia this morning, the positive trend on the stock markets continued for the most part and in Europe a friendly opening can be expected.

Investors took the statement of Robert Kaplan, head of the Fed Dallas, positive, which somewhat dispelled concerns about a tightening of monetary policy in the near future. Kaplan referred to the uncertainties arising from the spread of the delta variant of the coronavirus. Fed Chairman Jerome Powell had pointed out in his last speech that the pandemic had permanently altered the economy and it was important for the central bank to adapt to those changes. With the upcoming central bank symposium in Jackson Hole, Wyoming, the question of when and how the Federal Reserve will impliment a turn in its monetary policy will be the focus of the markets in the coming days. However, today the purchasing manager surveys will take center stage. 

Strong upward pressure on German producer prices

In Germany, prices at the producer level rose in July as strongly as not seen since the beginning of 1975 – that is, 46 years! On a year-on-year basis, producer prices, which are also transmitted to consumer prices with a time lag in some cases, rose by +10.4%. The increase was thus stronger than analysts expected +9.2%. In the previous month, prices had risen by +8.5% year-on-year and by +7.2% in May. The background to the strong price surge is on the one hand the increased energy prices and on the other hand the supply bottlenecks, which lead to material shortages, combined with strong demand. On a monthly basis, producer prices increased by +1.9%. The strong price increase at producer level is also likely to fuel consumer price inflation. In July, the inflation rate in Germany already reached +3.8%, the highest level in almost 30 years. The big question is whether the price pressure – as anticipated by the ECB – will only be of a temporary nature.

Germany at risk of missing climate targets in 2030 and 2040

In its “2021 Projection Report for Germany,” the German Federal Environment Ministry emphasized that the climate targets set by Germany cannot be achieved with the measures currently adopted, and the German government must step up its efforts. With the current progress, it would take twice as long for Germany to reach its emissions targets. According to climate experts, an earlier coal phase-out and a change in transport policy are important levers for achieving this. In the run-up to the Bundestag elections, these two issues are generating a great deal of debate. While the CDU and SPD are not in favor, the Greens are calling for a coal phase-out by 2030 in order to meet not only climate targets but also the requirements of the EU and the international Paris Agreement.

 

Economic Indicators August 23

MEZ Country Indicator Last period
09:15 FR IHS Markit PMI Composite (August)  56.6
09:30 GE IHS Markit PMI Composite (August)  62.4
10:00 EZ IHS Markit PMI Composite (August)  60.2
10:30 UK IHS Markit PMI Composite (August)  59.2
14:30 US Fed Chicago National Activity Index (August) +0.09
15:45 US IHS Markit PMI Composite (August)  59.9
16:00 US Existing Home Sales (July, m/m) +1.4%
16:00 EZ Consumer Sentiment (August) -4.4

 

Earnings Calender August 24

Country Company Period
US Best Buy Q2
US Medtronic Q1

 

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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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