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LGT Navigator: Sobering half-year results from Wall Street & Co.

July 1, 2022

Against the backdrop of fears of recession and inflation, the first-half results on the stock markets were weak. The balance sheet for the first half of the year is thus sobering, and not only on the New York Stock Exchange. Accordingly, the mood on the stock markets remains fragile and dominated by fears of recession and inflation against the backdrop of the monetary policy turnaround by the central banks. 

Sobering half-year results from Wall Street & Co.

The Dow Jones Industrial closed Thursday with a daily loss of -0.82% at 30,775.43 points amid fears of recession and inflation. The Dow thus closes the first half of the year with a loss of about -15%. The market-wide S&P 500 exited trading yesterday -0.88% at 3,785.38 points, losing a good -20% in the first six months of the year – the weakest half-year performance since 1970! The half-year losses were strongest on the Nasdaq with about -30% – the worst performance since 2002.

Europe's stock exchanges had also previously suffered significant losses. The EuroStoxx 50 closed -1.7% lower at 3,454.86 points, close to the low for the year of 3,387 points. This represents a loss of almost -20% for the first half of the year.

Meanwhile, on the bond market, the ten-year US Treasuries fell for the first time in almost three weeks below the 3% mark to 2.99%.

Before the National Day in the United States on Monday, on which all US financial markets remain closed, the focus today is mainly on the latest results of the monthly purchasing managers surveys in Europe and the United States.

Clouded business sentiment in Japan

According to the Bank of Japan's so-called Tankan report – a quarterly business survey conducted by the central bank – the business climate in the world's third-largest economy deteriorated further in the second quarter. Large industrial companies in particular were more pessimistic. The corresponding indicator fell to +9 at the end of June from +14 points three months earlier. Continuing supply chain problems and shortages of materials as well as energy prices played a decisive role here. However, Japanese industry is also feeling the effects of the lockdowns in China. Sentiment in the service sector appears to be somewhat better. This indicator improved in Q2 from +9 to +13 points. The Tankan report is based on a survey of around 10,000 companies.

On the Tokyo Stock Exchange, the Nikkei falls almost -2% on the first day of trading in July.

In contrast, the purchasing managers' indices from China, also published this morning, provided a positive impetus. Thus, the Purchasing Managers' Index (PMI) for China's manufacturing sector climbed back above the growth threshold of 50 points in June – from 49.6 to 50.2. The PMI for the service sector rose even more strongly from 47.8 to 54.7 points. On the Chinese stock exchanges, however, the good data could not affect the generally cautious mood and so the composite index on the Shanghai stock market is slightly in the red. At Hong Kong's stock exchange no trading took place because of a public holiday.

Weaker consumer spending in the US

Americans' spending rose less than analysts had expected in May. Month-on-month, consumer spending still increased by +0.2% (consensus +0.4%) and the previous month's reading was revised from +0.9% to +0.6%. At the same time, inflationary pressure remained unchanged at a high level. The inflation indicator preferred by the Federal Reserve – the PCE (Personal Consumption Expanditure) price index based on consumer spending - rose by +6.3% in May, or +4.9% in the core rate.

French inflation rate continues to rise

The cost of living in France again increased sharply in June, driven by the rise in energy and food prices. On an annual basis, the inflation rate reached +6.5%, the highest level since the establishment of the euro zone in 1999.

Outlook for the Swiss economy remains cautious according to KOF

The economic barometer of the Swiss Institute for Business Cycle Research (KOF) at ETH Zurich remained below the long-term average for the second month in succession, falling by 0.8 points to 96.9. The economy was burdened primarily by weaker foreign demand and the manufacturing sector, which continues to struggle with global supply chain problems. By contrast, a slightly positive trend was observed in private consumption.

Economic Indicators July 1

MEZ Country Indicator Last period
09:15 ES PMI Manufacturing (June) 53.8
09:30 SZ PMI Manufacturing (June) 60.0
09:45 IT PMI Manufacturing (June) 51.9
09:50 FR PMI Manufacturing (June) 51.0
09:55 GE PMI Manufacturing (June) 52.0
10:00 EZ PMI Manufacturing (June) 52.0
10:30 UK PMI Manufacturing (June) 53.4
11:00 EZ Consumer Prices (June, y/y) +8.1%
11:00 EZ Core Consumer Prices (June, y/y) +4.4%
11:00 IT Consumer Prices (June, y/y) +7.3%
15:45 US PMI Manufacturing (June) 52.4
16:00 US ISM Manufacturing (June) 56.1

 

Earnings Calender July 12

Country Company Period
US Pepsico Q2

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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