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LGT Navigator: Positive news flow drives equity markets

November 8, 2021

Stock markets continue the rally and benefit from positive impulses from a stronger than expected American labor market report and the potential pill against Covid-19 announced by the pharmaceutical company Pfizer. The adoption of the USD 1.2 trillion infrastructure investment program in the US also provides a positive impulse. In the coming days, the focus will now increasingly be on the quarterly earnings of European heavyweights.

Positive news flow drives equity markets

On US stock markets, the indices continued their record series on Friday. In addition to the stronger-than-forecast US labor market report, the prospect of a drug from the pharmaceutical company Pfizer in the fight against the corona pandemic with a high effectiveness (almost 90% protection against a severe course) provided further positive momentum. The Dow Jones Industrial closed +0.56% higher at 36'327.95 points, posting a weekly gain of +1.4%. The S&P 500 gained +0.37% to 4'697.53 points. On the Nasdaq technology exchange, the indices remained virtually unchanged after the strong rally.

In Asia, despite the positive guidance from overseas and better-than-expected export data from China (+27.1% vs. consensus +24.5%), stock markets didn't follow at the start of the week and tended in the majority slightly in negative territory.

This week, the focus of the ongoing corporate reporting season is now on Europe. On Tuesday, pharmaceutical giant Bayer and Covid-19 vaccine developer BioNTech will present their quarterly figures. This will be followed on Wednesday by Allianz, Adidas and, from the US, the entertainment group Walt Disney. On Thursday, Siemens, Merck KGaA and the British luxury goods group Burberry will continue. The week concludes with the results of Richemont, Deutsche Telekom and the pharmaceutical group AstraZeneca.

US infrastructure investment program on track

After months of tough wrangling, the USD 1.2 trillion infrastructure package was passed by congress in Washington. This represents an important political victory for the US President, who is currently under pressure, particularly in domestic politics. US President Joe Biden said “the program would create millions of jobs and pave the way for the US to win the economic competition in the 21st century against China and other large countries.” Biden now wants to sign the bill into law as soon as possible at a formal ceremony. In the meantime, however, the dispute over the second billion-dollar package of legislation to expand social benefits and protect the climate is entering the next round in the House of Representatives.

US labor market gains momentum

Employment in the United States surged in October and the unemployment rate fell more sharply than expected. According to the report, 531'000 new jobs were created last month (excluding the agricultural sector). Analysts had expected an average increase of 450'000 jobs. In addition, the Labor Department in Washington revised the figures for the previous two months upward by a total of 235'000 jobs. The unemployment rate fell to 4.6% in October, from 4.8% in September (consensus 4.7%). Although the US labor market is still in the recovery phase from the corona crisis – the unemployment rate was 3.5% in February 2020 – the Federal Reserve is likely to feel vindicated in the monetary policy turnaround it implemented last week, also because wage growth has accelerated noticeably in recent months. In October, average hourly wages rose by +4.9% over the year.

Industry in “core Europe” weakens

The phase of weakness in the German industry continued in September. Industrial production in Germany fell by -1.1% month-on-month, whereas analysts had expected a recovery. Against the background of continuing supply bottlenecks for raw materials and intermediates, the decline in German industry seen since April thus continued. In France, the second largest economy in the eurozone, industrial production also fell by -1.3% in September.

Economic Indicators November 8

MEZ Country Indicator Last period
07:45 SZ Unemployment Rate (October) 2.8%
10:30 EZ Sentix Economic indicator (November) +16.9

 

Earnings Calender November 8

Country Company Period
GE Henkel Q3 Sales
US PayPal Q3

 

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Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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