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LGT Navigator: Positive impulses from manufacturing spur stock markets

August 4, 2020

Good economic data are giving stock markets a boost – the US technology index Nasdaq climbs to a new high at the beginning of the month. The earning reports for the second quarter also contribute to the good stock market sentiment. US President Donald Trump is prepared to sign off on a potential TikTok deal, but only if the US receives money in exchange.

Earnings season remains in focus of stock markets

Global equity markets started the new month with solid gains. The good start was due in particular to robust economic data, which gives hope for an upswing in the industrial sector worldwide. Positive data from Europe boosted the American stock markets. Led by tech stocks Microsoft (+5.6%) and Apple (+2.5%), the technology index Nasdaq 100 reached a new record high and climbed +1.37% to 11 055.08 points. After the latest gains, the iPhone manufacturer Apple is the most valuable listed company in the world. 

The Asian stock markets traded firmer again on Tuesday. In Tokyo the Nikkei gained +1.6% and the Hang Seng Index in Hong Kong advanced +0.8%. The Shanghai Composite is down in the afternoon and is trading -0.1% lower.

Companies exceed market forecasts

The earnings season for the second quarter is also boosting the mood on stock markets. The results presented so far by the S&P 500 companies have clearly exceeded market expectations, as an analysis by the financial data provider Factset shows. By Friday, 84% of companies had performed better than forecasted. However, analysts have drastically revised their expectations downwards in advance. Almost two-thirds of the blue-chip companies have presented their figures so far.

Trump comments on TikTok

Meanwhile, US President Donald Trump has announced that he would support the purchase of the video app TikTok by Microsoft or another US company. Over the weekend it was announced that Microsoft is considering taking over the US business of the video platform and is in talks with ByteDance, the Chinese parent company of TikTok. Last week Trump had threatened to ban the app in the US because of security concerns. However, the president also stated that he expects a substantial portion of the purchase price to go to the US Treasury in the event of a deal.

European industry on course for growth

The euro zone industry returned to the growth zone at the beginning of the second half of the year. This was shown by the Purchasing Managers Index (PMI), which is compiled monthly for the entire currency area as well as for the individual euro countries. In June the PMI for the euro zone stood at 51.4 points (up 4.4 points month-on-month), thus crossing the 50 growth threshold for the first time since the outbreak of the corona pandemic. This improvement gives reason to hope that economic output will also pick up again in the third quarter. Industrial activity rose strongly in almost all countries, including Germany (51.0), France (52.4), Italy (51.9) and Spain (53.5). 
The PMI index also improved significantly in Switzerland (+7.3 points). However, at 49.2 points it is still just below the growth zone.

US manufacturing continues to recover

The US industry is still on the path to recovery. In July, the ISM index rose for the second month in a row, climbing to 54.2 points from 52.6 in the previous month. The barometer thus developed better than expected. Above a value of 50, the index signals an increase in activity in the manufacturing sector. The ISM index is one of the most important leading indicators for the US economy. Less good news, however, came from the real estate sector as construction spending surprisingly declined in June.

Economic Indicators August 4th

MEZ Country Indicator Last
07:45 CH Consumer confidence (Seco, Q3) -56.0
11:00 EZ Production prices (June) -0.6%
16:00 US New orders industry (June) 8.0%

Earnings Calendar August 4th

Country Corporate Period
CH Galenica H1
CH OC Oerlikon H1
GE Bayer Q2
US Walt Disney Q3




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US employment growth remains dynamic at the beginning of the year