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LGT Navigator: New prime minister moves into Downing Street

September 6, 2022

In the UK, Liz Truss has succeeded British Prime Minister Boris Johnson and is moving into Number 10 Downing Street. The former Foreign Secretary faces immense challenges, at the forefront inflation and the energy price crisis. At the start of the week, stock markets weakened in the face of the worsening energy crisis in Europe and the conflict with Russia, as well as the absence of the American markets due to a holiday.

New prime minister moves into Downing Street

Liz Truss (47) was yesterday appointed the new Prime Minister of the United Kingdom by members of the ruling Conservative Party. The successor to Boris Johnson prevailed in an internal party battle against former Finance Minister Rishi Sunak. She gained more than 80'000 votes, against around 60'000. After Margaret Thatcher and Theresa May, Truss is the third woman to head the British government.

The EuroStoxx 50 lost -1.53% at the beginning of the week and went out of trading at 3'490.01 points. At the center is the energy crisis in Europe, which has worsened significantly since the weekend with the halt of gas supplies from Russia through the Nord Stream 1 pipeline. The European auto sector took the hardest hit, losing around -5%, followed by the chemical sector, which fell by almost -3%. Meanwhile, in London, the focus was on the election of Liz Truss as the new Prime Minister. The British FTSE 100 remained virtually unchanged from Friday's close at 7,287.43 points. However, the London Stock Exchange was supported mainly by demand for energy and commodity stocks.

Asian stock markets show no clear trend on Tuesday. In Tokyo, the 225-value Nikkei index traded virtually unchanged, while in Hong Kong, the Hang Seng gave up early gains and fell by around -0.5%. The Shanghai Composite in mainland China is up about +1% and the Shenzhen Component is up about +0.7%. Meanwhile, Australia's central bank raised its key interest rate another 50 basis points to +2.35%.

Investors take a more negative view of the economic outlook

According to the monthly survey of the financial market analysis company Sentix, the economic outlook for the eurozone deteriorated in September compared to the previous month. The economic barometer fell by 6.6 points to minus 31.8 points, reaching its lowest level since May 2020. From a global perspective, the scales are also tipping towards recession and the US economy is on the brink of collapse, Sentix commented.

Business sentiment in Europe's private sector cooled further

S&P Global's Purchasing Managers' Index for the entire private sector in the euro area (PMI Composite) fell by one point in August compared with the previous month to 48.9 points. The indicator thus remains below the 50-point mark that separates growth from contraction and is at its lowest level in a year and a half.

Opec+ lowers production target

Following increases in recent months, the Opec+ cartel decided to slightly reduce its production target again. The joint daily production for October would be reduced by 100'000 barrels. As a result, oil prices rose on Monday. North Sea Brent rose by around USD 3.5 to USD 96 per barrel compared with last Friday's closing prices, and the US West Texas Intermediate (WTI) grade cost around USD 3 more, or just under USD 90.

Economic Indicators September 6

MEZ Country Indicator Last period
08:00 GE Industrial Orders (July, m/m) -0.4%
15:45 US PMI Composite (August) 45.0
16:00 US ISM Non-Manufacturing (August) 56.7


Earnings Calender September 6

Country Company Period
NL DSM Investor Day


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
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Source: LGT Bank (Switzerland) Ltd.


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