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LGT Navigator: New corona aid package to keep US economy on track

July 28, 2020

Investors are eagerly awaiting the new corona aid package currently being worked out in Washington. At the heart of the financial markets remains also the series of corporate news this week and the interest rate decision of the US Federal Reserve due tomorrow. At the same time, there are increasing signs that a second corona wave is already spilling around the globe. While in the US and South America the first wave threatens to escalate even further, other countries in Asia and Europe are confronted with a renewed increase in the number of new infections.

New corona aid package to keep US economy on track
US Capitol in Washington

The Republicans in the US Senate yesterday presented their proposal for a further aid package to cushion the consequences of the corona crisis with a volume of around USD 1 trillion. The program provides for a further round of one-time payments of USD 1 200 for “most“ private households. At the same time, unemployment aid is to be reduced, respectively the weekly lump sum payment of USD 600 is to be waived. Instead, the plan provides for wage replacement payments of 70%. The Democrats, however, advocate a package of USD 3 trillion, including a continuation of the weekly federal unemployment benefit of USD 600.

Tech stocks support Wall Street ­ fear of second corona wave dampens Asian stock markets

On the New York Stock Exchange, indices rose, driven by the prospect of new economic stimulus packages and popular technology stocks. The Dow Jones Industrial climbed by +0.43% to 26 584.77 points and the broad-based S&P 500 increased by +0.73% to 3 239.41 points. The technology-heavy Nasdaq 100 rose even more strongly by +1.82% to 10 674.38 points. Numerous quarterly results from tech stocks are eagerly awaited in the course of the week. In Asia this morning, the stock markets did not present a uniform picture and fears of a second pandemic wave dominated. Some countries, such as China, Vietnam and Australia are already reacting to a second wave of Covid-19 with renewed, albeit “only“ local lockdowns. In Europe, too, the holiday season seems to be causing a renewed increase in infections, which could lead to renewed restrictions on contact and other measures.

US industry reports increase in orders

Orders for durable goods (with a lifetime of at least three years) in the US rose more strongly than expected in June. Orders rose by +7.3% (consensus +5.4%) compared with the previous month. The much-noticed data on orders for civil capital goods excluding aircraft, which is considered an important measure of corporate investment, rose by +3.3% in June.

US government finances Covid-19 vaccine candidates

The US government plans to pay additional costs of around USD 470m for an expanded Phase-3 study for the corona vaccine candidate of the US biotechnology company Moderna. With the additional investment, Washington is spending a total of almost USD 1bn to secure a Covid-19 vaccine. Moderna is on track to provide around 500m doses of the vaccine per year if successful, and even to increase production capacity to up to 1bn doses from 2021 onwards as part of a strategic collaboration with the Swiss company Lonza.

Ifo business climate rises for the third month in a row

The approximately 8 000 companies surveyed each month by the Munich-based economic research institute Ifo have again expressed more confidence in the current issue. The highly regarded Ifo business climate barometer improved for the third month in a row, rising by 4.2 points to 90.5 points compared with the previous month. Analysts had predicted an average increase to 89.3 points. Against the backdrop of the corona crisis and the lockdown, the index had slumped to a record low of 74.3 points in April. According to Ifo, a gradual recovery of the German economy is to be observed.

Meanwhile, the German Bundesbank also expects a significant recovery of the economy in the second half of the year. The recovery trend will continue, also thanks to the recently adopted economic stimulus package, according to the monthly report published yesterday. According to the Bundesbank's assessment, the low point should have been reached as early as April. Overall, however, the economy is still far below the level before the crisis.

Economic Indicators July 29

MEZ Country Indicator Last
20:00 US FOMC monetary policy announcement +0.0-0.25%

Earnings Calendar July 28

Country Corporate Period
FR Kerning H1
UK Reckitt Benckiser H1
US Pfizer Q2
US 3M Q2
US Starbucks Q2
US Aflac Q2




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Source: LGT Bank (Switzerland) Ltd.

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