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LGT Navigator: Positive underlying sentiment

June 28, 2021

On Wall Street, stock indices extended their recent gains on Friday and the market-wide S&P 500 even reached a new record high. On the one hand, investors' optimism about the economy and the continued relaxed stance of the most important central banks, despite inflationary pressure continuing to rise in many places, and on the other hand, progress in the wrangling over the trillion-dollar US infrastructure investment package had a supportive effect.

Positive underlying sentiment

The Dow Jones Industrial climbed at the end of the past trading week by +0.69% to 34'433.84 points and thus achieved an impressive gain of almost +3.5% over the week. The S&P 500 exited the day's trading on Friday at 4'280.70 points (+0.33%) recorded the strongest week since February. Stock market sentiment also remained friendly in Europe on Friday, with the EuroStoxx 50 posting a weekly gain of just under one percent. Equity indices in Asia traded mostly sideways with no clear trend, but with a basic positive sentiment at the start of the week. However, the risk of rising bond yields in the face of continued inflationary pressure and the associated potential setback on the stock markets is likely to keep investors' appetite for buying in check.

Inflationary pressure in the US continues to increase

Consumer prices in the United States rose by +3.4% year-on-year in May. This is the strongest price increase since April 1992, according to data from the US Department of Commerce. This calculation excludes volatile energy and food prices, so it is the core inflation rate that the Federal Reserve also uses to assess inflation. It aims for an annual inflation target of 2%, which has now been clearly exceeded. However, US central bankers have repeatedly emphasized in recent weeks and months that they consider any overshooting of inflation to be temporary and that an adjustment of monetary policy is not an issue for the time being. Meanwhile, consumer spending by US households stagnated in May, a separate survey showed. In addition, disposable household income fell somewhat, partly because direct payments to citizens from the Corona aid package have partially expired.

Consumer mood in Germany brightens

In Germany, consumer sentiment rose in June and is as good as it was last in August 2020, the consumer research company GfK reported on Friday. Respondents are more optimistic again about the economic situation, which is reflected in the corresponding sub-indicator, which has climbed to its highest level in ten years. Despite the brightening of the consumer climate, however, the barometer remains below the long-term average. As easing measures and progress on vaccinations continue, a noticeable recovery in private consumption is becoming more likely in the second half of the year, according to the GfK release.

Regional elections in France as presidential election barometer

French President Emmanuel Macron and right-wing populist Marine Le Pen both suffered heavy defeats in regional elections. Macron's LREM party did not emerge victorious in a single region in Sunday's second round. Le Pen's party also failed to achieve its goal of winning a region for the first time. The regions where voting took place thus remained predominantly in the hands of the bourgeois right and the left. Voter turnout remained conspicuously low – two out of three eligible voters stayed away from the polls. In ten months, the presidential elections will be held in France, and it seems that the incumbent head of state and the right-wing challenger are having great problems convincing voters with their policies.


Economic Indicators June 29

MEZ Country Indicator Last period
01:50 JP Retail sales (y/y, May) +11.9%
08:45 FR Consumer Confidence (June) 94.0
09:00 SP Consumer Prices (June, y/y) +2.4%
11:00 EZ Economic Sentiment (June) 114.5
14:00 DE Consumer Prices (June, y/y) +2.4%
15:00 US S&P/Case-Shiller home price index (y/y, April) +13.3%
16:00 US Consumer Confidence (June) 117.2


Earnings Calender June 30

Country Company Period
US Micron Technology Q3


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