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LGT Navigator: Stock markets fly with tailwind into the end of the month

August 31, 2020

At the end of last week, equity markets initially failed to find a clear trend. In New York, however, the indices were able to post further gains on Friday with the tailwind from the US Federal Reserve's strategy adjustment, and in Asia, too, the new week, or rather the last day of the month, began with a positive trend. In some cases, Asian stock indices reached their highest level in 29 months. However, investors continue to be concerned about the rising corona infection figures in many places and the associated fear of restrictions. Meanwhile, the political fronts in Washington have hardened in the middle of the election campaign, leaving a solution in the dispute over the new US corona aid package open.

Stock markets fly with tailwind into the end of the month

On the New York Stock Exchange, the Dow Jones Industrial recorded a daily gain of +0.57% on Friday, closing at 28 653.87 points, achieving a weekly gain of +2.6%. The market-wide S&P 500 rose by +0.66% over 3 500 points, closing at a new record high of 3 508.01 points. In addition to the change in strategy by the Fed, positive economic signals provided optimism for investors. At the same time, the US dollar continues to suffer from the Fed's zero-interest policy, which will continue for a long time to come under the new regime, sending the greenback near to a two-year low. In Asia, most stock indices continued the positive trend from the US and opened the new trading week with partly solid profits. In Tokyo, the Nikkei index, which comprises 225 stocks, rose by +1.6% to 23 248.27 points. According to a Reuters report, the investment group Berkshire Hathaway, which is led by stock market legend Warren Buffett, is said to have invested in five leading Japanese trading companies.

Hardly any movement in the dispute over the US corona package

According to statements by the President of the House of Representatives, Nancy Pelosi, the Democrats are still willing to compromise in the negotiations on a new corona aid package and to lower their original demands. However, the Republicans must also be prepared to compromise, said Pelosi. There are differences of opinion in particular over the design of unemployment benefits to cushion the effects of the corona crisis on the labor market.

Americans somewhat more confident than a month ago

According to the final survey results from the University of Michigan, the mood of American consumers improved more than expected in August despite the still high Covid-19 infection figures in many parts of the US. The consumer confidence barometer rose from 72.5 points in July to 74.1 points in August. Analysts had assumed an average of 72.9 points. US private households surveyed assessed both their current situation and future expectations more optimistically than in the previous month. Private consumption plays a decisive role for the US economy, as it accounts for around 70% of gross domestic product.

Trump threatens US companies with punitive tariffs

In his speech on the nomination of the Republican Party as presidential candidate, US President Donald Trump threatened American companies that plan to relocate jobs abroad. After a successful re-election, he said he would ensure that companies would be fined if they relocated jobs abroad. The agenda of Joe Biden is “Made in China“, his agenda is “Made in the USA“, Trump said.

Recovery in the euro zone seems to be progressing

Economic sentiment in the euro zone continued to recover in August from the corona shock in March and April, according to the latest survey results of the EU Commission. The Economic Sentiment Indicator rose by 5.3 points to 87.7. The result was thus stronger than analysts had expected with 85.0 points. The recovery is based on continued improvement in the industry, the retail and especially in the service sector. Hopes for a further economic recovery are also supported by a more optimistic assessment by companies. The business climate barometer improved from minus 1.80 points in July to minus 1.33 in August.

Swiss economy in upswing phase according to KOF

The economic barometer published by the KOF Economic Research Institute rose sharply in August for the third month in a row, thus confirming expectations of a further recovery from the slump following the lockdown. The economic barometer rose in August by 24.2 points to 110.2 points, which means that the indicator is well above the long-term average. According to the KOF, the Swiss economy is in the upswing phase of an initially V-shaped recession.



Economic Indicators August 31

MEZ Country Indicator Last
09:00 SP Consumer Prices (August, y/y) -0.7%
10:00 IT GDP Q2 (q/q) -12.4%
11:00 IT Consumer Prices (August, y/y) +0.8%
14:00 GE Consumer Prices (August, y/y) 0.0%

Earnings Calendar September 3

Country Corporate Period
SZ Kaba Holding Full Year


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Source: LGT Bank (Switzerland) Ltd.

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