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LGT Navigator: Recovery rally on the stock markets driven by hopes

June 27, 2022

On Wall Street, a more optimistic view of things ensured a solid end to the week. Against the backdrop of record low consumer sentiment in the US, the Federal Reserve could be somewhat more cautious in its course of interest rate hikes so as not to risk a recession, according to the assumption of many market participants. In principle, however, fears of recession are likely to remain a dominant factor in stock market sentiment and the recent recovery could well turn out to be a bear market rally. As expected, the G7 summit focused on the Ukraine war and the conflict with Russia. However, a USD 600 billion infrastructure project attracted attention. 

Recovery rally on the stock markets driven by hopes

On the New York Stock Exchange, the stock indices continued their recovery at the end of last week. The Dow Jones Industrial closed with a strong daily gain of +2.68% at 31,500.68 points. Over the week, the result was a gain of +5.4%. The S&P 500 gained +3.06% to 3,911.74 points on Friday and on the Nasdaq, the indices rose by around +3.5%. In Europe, the recovery on the stock markets had also continued before the weekend and the EuroStoxx 50 closed +2.82% higher on Friday. The recovery was supported by hopes of a slightly less aggressive approach by the Fed in the fight against inflation, should it soon reach its peak.

In Asia, most stock markets joined the positive guidance from the US and recorded some strong gains at the beginning of the week. In Hong Kong, for example, the Hang Seng rose by almost +2.5% and in Shanghai, the Composite Index rose by +1.1%. In Tokyo, the Nikkei 225 trades around +1.6% higher.

US consumer sentiment hits new low

Households surveyed monthly by the University of Michigan were pessimistic about their current situation and outlook in June. The consumer confidence barometer fell to a record low of 50.0 points. At the same time, 79% of the consumers surveyed expect bad times for the economy in the coming year - the highest figure since 2009.

G7 pledge USD 600 billion “Belt and Road” project

At the summit meeting of the heads of state and government of the G7 nations, the focus was on the war in Ukraine and the conflict with Russia. In addition, however, the G7 also tried to do something to counter China's economic expansion. With the so-called "Belt and Road" project, the seven leading industrialized nations want to invest around USD 600 billion in infrastructure in developing countries over five years. The project is intended to provide a sustainable alternative to China's “Silk Road”.

Potential energy crisis weighs on German business climate

According to the latest survey results from the Munich-based economic research institute Ifo, business sentiment in Germany clouded over in June. The widely followed business climate barometer fell from 93.0 to 92.3 points. Analysts had expected a smaller decline to 92.8 points. This was due to rising energy prices and concerns about a supply shortage for industry in view of the risk of a supply freeze from Russia. Companies were noticeably more pessimistic about the second half of the year and the chemical industry was highly concerned, Ifo commented.

Impending bottlenecks in gas supply cause growing nervousness in the EU

At the EU summit last Friday, leaders stressed that the effort for Europe's energy security must be further accelerated, and dependence on Russia reduced. Since the Ukraine war began in February, Europe's dependence on Russian gas has taken center stage. After the Kremlin has already severely curtailed or completely halted gas supplies to Germany and other EU states, the EU is trying to find a common response. However, this is still extremely difficult, given the different energy and security policy issues of the member states. The German government last week raised the alert level in its “gas emergency plan” and called on companies and consumers to save energy.

Economic Indicators June 27

MEZ Country Indicator Last period
08:00 GE Retail Sales (May, m/m) -5.4%
10:00 GE Bundesbank Monthly Report
14:30 US Durable Goods Orders (May, m/m) +0.5%
16:00 US Pending Home Sales (May, m/m) -3.9%


Earnings Calender June 27

Country Company Period
US Nike Q4


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