At the beginning of the week, the upward trend in yields continued, after the yield on ten-year US government bonds climbed from 1.15% to over 1.3% in the course of last week. At the beginning of the year, US government bonds were only yielding around 0.9%. The rise in yields reflects market participants' expectations of a strong economic recovery and rising inflation. If this scenario comes true, debt interest rates are also likely to rise, which will hurt companies that rely on cheap credit in particular. But proud equity valuations could also come under pressure. Among the losers yesterday were mainly the technology giants Apple, Amazon, Microsoft, Netflix and Alphabet. Thus, the indices on the Nasdaq technology exchange fell sharply on Monday. The Nasdaq 100 slumped by -2.63% to 13'223.74 points.
However, there are also winners in the current market environment and these include financial stocks. The business model of banks is benefiting above all from a steeper yield curve, i.e. the difference between long-term and short-term interest rates. The US yield curve is currently as steep as it was last in 2016. Accordingly, financial stocks have been in demand in recent weeks and have performed significantly better than the S&P 500, which fell yesterday by -0.77% to 3'876.50 points, while the Dow Jones Industrial remained almost unchanged from Friday's close at 31'521.69 points (+0.09%).
After the correction in technology stocks on Wall Street, the Asian stock exchanges trended somewhat firmer this morning, with no trading in Japan due to the holiday. For Europe's stock exchanges, the futures markets this morning signal an opening slightly above the previous day's level. The focus of interest is primarily the speech of US Federal Reserve Chairman Jerome Powell this afternoon, starting from 16:00 (CET).
Hopes for an economic upswing are also reflected in the commodity markets. Thus, the Bloomberg Commodity Index, which tracks the price development of 23 commodities, climbed to its highest level since March 2013! The price of a barrel of US WTI crude oil exceeded the USD 60 mark, and North Sea Brent crude now costs around USD 66. Extremely cold temperatures in parts of the US are also currently causing prices to rise. Commodity experts therefore expect oil prices to continue to rise significantly in the coming months. WTI could rise to USD 72 in the third quarter, and a barrel of Brent could cost up to USD 75. In addition, the prospect of an economic recovery and thus an expansion of production is pushing up the prices of industrial metals. On the commodity exchange in London, a ton of copper cost USD 9270 on Monday - the metal is thus as expensive as it was last ten years ago. If the high continues, the previous record price of just under USD 10'200 from 2011 could be exceeded. Demand for nickel is also unbroken: prices have climbed to over USD 20'000 per ton for the first time in seven years.
Sentiment among German companies brightened in February despite the strict corona protection measures. The Ifo business climate index improved by 2.1 points to 92.4 points compared to the previous month, the Ifo Institute announced in Munich on Monday. This is the highest level since October. Analysts had only forecast an improvement to 90.5 points. The managers surveyed were more optimistic about both the current market situation and future prospects than at the beginning of the year. Sentiment has improved in all sectors. The business climate in manufacturing, which is less affected by the restrictions than retail and service providers, has even risen to its highest level in more than two years. For the first time, the tourism sector is also somewhat more confident about the future and is pinning its hopes on the upcoming vacation season. Nevertheless, the situation in the service sector remains difficult, the Ifo Institute explained.
The German economy should find its way back onto the recovery path in spring, the German Bundesbank expects. Falling infection numbers, widespread availability of vaccines and the easing of corona-related protective measures are expected to contribute to the economic upturn from the second quarter onwards, writes the central bank in its February monthly report. In the first quarter, however, the Bundesbank expects another noticeable decline in economic activity, triggered by the consequences of the pandemic. But there is no reason to fear that the slump will be as severe as in spring 2020, the report says. In 2020, Germany's gross domestic product contracted by -5% year-on-year.
|10:00||IT||Industry orders (December)||+5.3%|
|11:00||EZ||Consumer Prices (January, m/m)||+0.3%|
|11:00||EZ||Consumer Prices (January, y/y)||+0.9%|
|11:00||EZ||Core Consumer Prices (January, y/y)||+1.4%|
|15:00||US||S&P CaseShiller House Prices 20 biggest Cities (December, y/y)||+9.1%|
|16:00||US||Consumer Confidence (February)||89.3|
|16:00||US||Fed President Powell Testamony on economy and outlook|
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: email@example.com
Source: LGT Bank (Switzerland) Ltd.
Risk Disclosure (Disclaimer)
This publication is an advertising material / marketing communication. This publication is for your information only and is not intended as an offer, solicitation of an offer, or public advertisement to buy or sell any investment or other specific product. Its content has been prepared by our staff and is based on sources of information we consider to be reliable. However, we cannot provide any confirmation or guarantee as to its being correct, complete and up to date. The circumstances and principles to which the information contained in this publication relates may change at any time. Information that has been published should therefore not be understood as implying that no change has taken place since its publication or that it is still up to date. The information in this publication does not constitute an aid for decision-making in relation to financial, legal, tax-related or other consulting matters, nor should any investment decisions or other decisions be made on the basis of this information alone. It is recommended that advice be obtained from a qualified expert. Investors should be aware that the value of investments can fall as well as rise. Positive performance in the past is therefore no guarantee of positive performance in the future. Investments in foreign currencies are also subject to fluctuations in exchange rates. We disclaim all liability for any loss or damage of any kind, whether direct, indirect or consequential, which may be incurred through the use of this publication. This publication is not intended for persons subject to legislation that prohibits its distribution or makes its distribution contingent upon an approval. Any person coming into possession of this publication shall therefore be obliged to find out about any restrictions that may apply and to comply with them. In line with internal guidelines, persons responsible for compiling this report are free to buy hold and sell the securities referred to in this report.