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LGT Navigator: Stock markets shift down a gear ahead of central bank decisions

November 2, 2021

Equity markets got off to a dynamic start in the new week and Wall Street once again set new records. Today, however, investors are likely to be somewhat more cautious ahead of the Fed's interest rate decision on Wednesday. Meanwhile, the Australian central bank's monetary policy tightening could have some signal effect. Current purchasing managers' indices from the US, the UK and China confirmed a still intact growth trend in the industrial sector, but also highlight the existing supply chain and material problems. Purchasing managers' surveys from the euro zone now follow today.

Stock markets shift down a gear ahead of central bank decisions

The Dow Jones Industrial climbed in early trading briefly above the mark of 36'000 points, but then lost some momentum during the day. At the close, the Dow stood at 35'913.84 points (+0.26%). The S&P 500 also continued the record chase initially, but then could not fully hold the gains and closed +0.18% higher at 4'613.67 points. On the Nasdaq, the record series also continued. Before tomorrow evening's upcoming interest rate decision by the Federal Reserve, the stock exchange traders are now increasingly likely to hold back.

In Asia, most stock market indices, after a partly brilliant start to the week, tended slightly negative today, which is likely to reflect the restraint of investors before the upcoming interest rate decisions.

Australia's central bank tightens its monetary policy – signal effect?

The Reserve Bank of Australia feels compelled to act in the face of increasing inflationary pressure and is abandoning its yield curve management program introduced during the pandemic. This makes Australia's central bank one of the first major central banks to act against rising inflation. RBA Governor Philip Lowe said, “The decision to abandon the yield target reflects the improvement in the economy and the earlier than expected progress toward the inflation target.” However, while the RBA loosened its grip on the yield curve, it also signaled that it was in no hurry to raise short-term interest rates and pledged to maintain them until inflation is sustained in its 2-3% target range.

US industry remains on growth path despite supply bottlenecks, according to ISM

Activity in the US industrial sector slowed moderately in October, but the much-watched ISM Purchasing Managers' Index (PMI), due to its strong correlation with the overall economy, continues to signal a solid growth trend. The PMI eased slightly from 61.1 to 60.8 points, while analysts on average had expected a slightly stronger decline to 60.5 points.

British industry slightly more optimistic

IHS Markit's Purchasing Managers' Index for the UK's industrial sector improved by 0.7 points to 57.8 in October. However, the situation remains tense given the problems in global supply chains, the institute said. However, at above 50 points, the British industrial sector also remains on a growth path.

New lockdowns and supply bottlenecks weigh on China's industry

The latest purchasing managers' indexes from China suggest relatively weak growth momentum in the industrial sector. Although sentiment among small and medium-sized industrial companies improved again somewhat in October according to the survey by the Chinese business magazine Caixin, the PMI with a value of 50.6 points (previous month 50.0) points to rather weak economic momentum. In addition, the state purchasing managers' index, which focuses on large and state-dominated industrial groups, showed a weakening of the PMI in October from 49.6 points in September to 49.2 points. Companies are burdened on the one hand by problems in global supply chains, material shortages as well as power bottlenecks and on the other hand by renewed lockdowns due to local Covid-19 outbreaks.

Economic Indicators November 2

MEZ Country Indicator Last period
08:30 SZ Consumer Prices (October, y/y) +0.9%
09:15 SP IHS Markit PMI Manufacturing (October) 58.1
09:45 IT IHS Markit PMI Manufacturing (October) 59.7
09:50 FR IHS Markit PMI Manufacturing (October) 53.5
09:55 GE IHS Markit PMI Manufacturing (October) 58.2
10:00 EZ IHS Markit PMI Manufacturing (October) 58.5

 

Earnings Calender November 2

Country Company Period
SZ Adecco Q3
GE Fresenius Q3
AUT Erste Group Bank Q3
AUT ams Osram Q3
NL DSM Q3
UK BP Q3
UK Standard Chartered Q3
US Pfizer Q3
US Amgen Q3
US DuPont Q3
US T-Mobile US Q3
US Mondelez International Q3
US Conoco Phillips Q3

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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