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LGT Navigator: Second corona wave drives stock markets under water

October 29, 2020

The dramatic increase in the spread of the coronavirus and fears that renewed lockdowns could ruin the already fragile economic recovery are causing increasing nervousness on capital markets. Stock markets slipped sharply again yesterday, as individual countries such as France have decided on an effective lockdown, while others, such as Germany and Switzerland, are trying to prevent a complete standstill with at least a broad slowdown. In addition, investor nervousness is becoming increasingly noticeable shortly before the elections in the US. Today's focus will be on the ECB and a series of corporate earnings reports.

Second wave pushes stock markets under water

The second wave of corona has the Western world in particular firmly in its grip. Worldwide, the number of corona cases amounts to 44.4 million, with more than 1.17 million deaths globally in connection with Covid-19. On Wall Street, the slide in share prices continued unabated yesterday. The Dow Jones Industrial fell by -3.43% to 26 519.95 points, closing just above its recent daily low. The S&P 500 recorded a daily loss of -2.78% and closed Wednesday at 3 271.03 points. The nervousness on the stock markets is also visible in the fear barometer in the form of the volatility indices. The VIX reached its highest level since the stock market crash in March and its European counterparts, the VStoxx and VDax, each reached their highest level in four and a half months. In Asia, the decline in share prices seems to have lost momentum. The more favorable economic outlook for the Asian region compared with the prospects for Europe and the US, which are clouded by the second wave of the pandemic, should have had a supportive effect. However, no uniform trend could be observed on the Asian stock markets today.

Today, a whole flood of company reports is pending: In Europe, Credit Suisse, Volkswagen, Fresenius, Sanofi and Royal Dutch Shell are presenting their results and in the US especially the tech giants Alphabet, Amazon, Apple, Facebook and Twitter are in the spotlight.

ECB interest rate decision becomes almost a side event

In view of the currently dominating market themes of Covid-19 and the US elections, the monetary policy decision of the European Central Bank (ECB) at 13:45 (CET), which is otherwise the focus of attention, is almost receding into the background. If any lockdowns should choke off the economic recovery in the eurozone, the central bank would probably be asked to reach into its ammunition box again. An immediate adjustment of monetary policy is not expected, but the press conference by ECB President Christine Lagarde at 2:30pm is eagerly awaited.

EU summit discusses common line against pandemic

The heads of state and government of the European Union will today (from 6.30pm) use video conferencing to short-circuit each other and discuss a common line in the fight against the second wave of the pandemic. The main topics will be testing and vaccination strategies, e.g. the use of new rapid antigen tests, and contact tracing.

Outlook for German economy considerably clouded

According to a new study by the German Institute for Economic Research (DIW), the prospects for the German economy have deteriorated considerably in view of the second wave of the pandemic. The strong catch-up process that was still evident in the summer is unlikely to continue. The threat of measures to contain the pandemic will dampen the confidence of consumers and companies. As a result, the DIW economic barometer for the fourth quarter fell from 122 points to 105 points.



Economic Indicators October 29

MEZ Country Indicator Last
09:00 SP Consumer Prices (October, y/y) -0.6%
09:55 GE Unemployment Rate (October) 6.3%
10:00 IT Business Climate (October) 92.1
10:00 IT Consumer Confidence (October) 103.4
11:00 EZ Economic Sentiment (October) 91.1
11:00 EZ Consumer Confidence (October) -15.5
13:30 US Initial Jobless Claims (weekly) +787,000
13:45 EZ ECB monetary policy announcement 0.0%
14:00 GE Consumer Prices (October, y/y) -0.4%
14:30 EZ ECB Press Conference
15:00 US Pending Home Sales (September, m/m) +8.8%

Earnings Calendar October 29

Country Corporate Period
SZ Credit Suisse Q3
SZ Swisscom Q3
SZ Geberit Q3
SZ Clariant Q3
GE Volkswagen Q3
GE Fresenius Q3
FR Sanofi Q3
NL Royal Dutch Shell Q3
SP Telefonica Q3
BE Anheuser-Busch Inbev Q3
UK Lloyds Banking Q3
UK BT Group H1
US  Alphabet Q3
US Apple Q4
US Facebook Q3
US Amazon Q3
US Twitter Q3
US Amgen Q3
US Starbucks Q4


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
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Source: LGT Bank (Switzerland) Ltd.

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