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LGT Navigator: Light and shadow

August 26, 2020

The market environment for investors remains extremely challenging and the level of uncertainty high. Hopes for a Covid-19 vaccine and vague optimism regarding the US-China trade relationship contrast with a worrying increase in corona infection numbers and contrary economic news from the US and Germany. While the mood of American consumers clouded over in the face of the ongoing corona crisis, the confidence of German entrepreneurs in an economic recovery strengthened.

Corona crisis brings light and shadow to the financial markets

Positive news regarding the Covid-19 vaccine strengthened investors' hopes of containing the corona pandemic. According to the British pharmaceutical company AstraZeneca, for example, the development of a Covid-19 vaccine is currently in progress. A phase 1 clinical trial of the active ingredient “AZD7442“ of two monoclonal antibodies has been initiated. The study aims to determine the safety, tolerability and pharmacokinetics of the potential drug. However, the pandemic development is less positive. While the US, South America and many European countries are struggling with increasing numbers of new Covid-19 infections, South Korea had to close schools in the capital Seoul only three months after the nationwide opening.

In New York, the S&P 500 reached another record high shortly before the close of trading and closed +0.36% higher at 3 443.62 points. The technology-heavy Nasdaq 100 rose by +0.82% to 11 721.81 points, only slightly below the previous day's record level. In contrast, the Dow Jones Industrial recorded a daily loss of -0.21% and closed at 28 248.44 points. Investors in Asia were also on the cautious side. The financial markets are now eagerly awaiting the virtual Jackson-Hole Central Bank Symposium which begins tomorrow.

Ongoing corona crisis depresses morale of US consumers

Contrary to expectations, consumer sentiment in the United States has once again deteriorated significantly in August, according to the latest survey conducted by the New York-based economic research institute the Conference Board. After the consumer confidence barometer had already declined in July, the indicator fell this time from 91.7 points in July to 84.8 points, the lowest value in more than six years. A further improvement to 93.0 points was expected on the markets. The private households surveyed were more pessimistic about their current situation and future prospects.

German corporates of industry more optimistic in Ifo survey

The approximately 8 000 companies questioned monthly by the Munich-based economic research institute Ifo again showed greater confidence in the latest survey regarding the outlook for the German economy. The mood barometer improved in August for the fourth month in a row, rising from 90.4 to 92.6 points (consensus forecast 92.2). Following the slump to a record low, the German economy thus appears to be recovering. Meanwhile, the Federal Statistical Office published the latest data on gross domestic product. According to these figures, the German economy slumped by -9.7% in the second quarter compared with the previous quarter due to the corona crisis, although this was less severe than initially assumed at -10.1%.

New composition in the Dow Jones Index

In addition to the pharmaceutical giant Pfizer and the armaments company Raytheon, the oil company ExxonMobil will also have to give up its place among the 30 standard US stocks after 92 years (1928!) of inclusion in the Dow Jones Index. This leaves Chevron as the only energy company in the index. The new “stars“ are the biotechnology group Amgen and the conglomerate Honeywell as well as the cloud specialist The restructuring was triggered by the upcoming stock split at Apple, in which each share is to be split into four new securities.

Alipay, anticipated mega IPO

Alipay is the financial arm of the Chinese online trading platform Alibaba and operates the largest mobile payment service in China, offering loans, insurance and asset management. The planned IPO of the financial services provider, which belongs to the Ant Group of billionaire Jack Ma, is expected to raise more than USD 20bn and achieve a market capitalization of more than USD 200bn. A double listing on the stock exchanges in Hong Kong and Shanghai is planned. A listing in the US is currently not planned.



Economic Indicators August 26

MEZ Country Indicator Last
08:45 FR Consumer Confidence (August) 94.0
14:30 US Durable Goods Orders (July, m/m) +7.6%

Earnings Calendar August 27

Country Corporate Period
SZ Baloise H1


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Source: LGT Bank (Switzerland) Ltd.

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