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LGT Navigator: Market sentiment remains tense in anticipation of next Fed rate move

May 3, 2022

The mood on the capital markets remains tense with a focus on the expected further interest rate tightening by the Federal Reserve on Wednesday evening. Uncertainties also continue to be caused by economic concerns regarding the impact of the corona lockdowns in China on global supply chains as well as the unabated Ukraine war. These uncertainties are also being felt by companies, as reflected in a slump in industrial sentiment in the eurozone in April to a 15-month low.

Market sentiment remains tense in anticipation of next Fed rate move

In New York, the stock indices recovered somewhat at the beginning of the week from last Friday's slump. Technology stocks, which had previously sold off, were in particular demand. The Dow Jones Industrial ended Monday's trading at 33'061.50 points (+0.26%) and the S&P 500 gained +0.57% to 4'155.38 points. On the Nasdaq, the indices gained about +1.7%. The focus is now the Fed's interest rate decision expected tomorrow evening, with a further interest rate hike firmly expected. The question is at most how high the interest rate step will be, +25 or +50 basis points. In the run-up, the yield on ten-year US government bonds was quoted at three percent for the first time since December 2018.

Brussels prepares new sanctions package against the Kremlin – is the oil embargo coming?

The EU Commission wants to present a proposal for a new, already the sixth, Russia sanctions package by the middle of this week at the latest. The question is whether the euro countries will succeed in agreeing on a comprehensive oil embargo against Russia. Hungary, for example, already announced a veto.

Industry in the US and eurozone more skeptical about the near future

The industry sentiment barometer of the ISM (Institute for Supply Management) industry association in the US, which receives a lot of attention because of its correlation with US economic growth, fell from 57.1 to 55.4 points in April, its lowest level since mid-2020, compared with the consensus of 57.6 points. The US industry continued to report solid demand, but ongoing supply bottlenecks were weighing on production, the ISM commented.

In the eurozone, sentiment in the industrial sector also deteriorated further in April amid the Ukraine war and uncertainty in global supply chains due to the pandemic lockdowns in China, the latest survey data showed. The Purchasing Managers Index fell one point from the previous month to 55.5 points, its lowest level in 15 months.

General economic sentiment in the eurozone countries also deteriorated again against the backdrop of the Ukraine war and the conflict with Russia. The EU Commission's Economic Sentiment Indicator (ESI) fell by 1.7 points to 105.0 in April. According to the survey results, sentiment has deteriorated in all economic sectors, particularly in industry, retail, or construction.

Swiss economy also suffers from increased uncertainties

The outlook for the Swiss economy deteriorated in April in both the service sector and industry. For example, the purchasing managers' index for the service sector fell significantly by almost five points to 56.2 points, while the PMI for industry slipped from 64.0 to 62.5 points. Tight supply chains pose major challenges for the economy, commented the purchasing managers' association Procure.ch.

The mood of Swiss consumers also deteriorated in the first quarter. The consumer confidence barometer of the State Secretariat for Economic Affairs (Seco) fell from minus 3.6 to minus 27.4 points. The last time there was a similarly sharp decline was during the outbreak of the corona pandemic in spring 2020, Seco wrote.

  

Economic Indicators May 3

MEZ Country Indicator Last period
00:00 JP, SING Holiday
09:55 GE Unemployment Rate (April) +5.0%
10:30 UK PMI Manufacturing (April) 55.3
11:00 EZ Producer Prices (April, y/y) +31.4%
11:00 EZ Unemployment Rate (April) 6.8%
12:00 EZ Eurogroup Meeting
15:00 EZ ECB President Lagarde speaks
16:00 US Durable Goods Orders (March, m/m) -0.5%

 

Earnings Calender May 3

Country Company Period
SZ Logitech Jahreszahlen
GE Deutsche Post Q1 
AUT ams-Osram Q1
FR BNP Paribas Q1 
NL DSM Q1
UK BP Q1
NOR Norsk Hydro Q1
NOR Telenor Q1
US Pfizer Q1
US Biogen Q1
US DuPont Q1
US Starbucks Q1
US Airbnb Q1
US AMD Q1

 

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Imprint
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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