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LGT Navigator: Supported by hopes – dampened by uncertainties

October 8, 2020

While European stock markets found no reason for further purchases due to the disappointment of the talks postponed by US President Trump on a US corona aid package, on Wall Street confidence again prevailed that there might be an early agreement on Capitol Hill after all. It is difficult to say who did better in the TV duel between US Vice President Pence and Democratic vice-candidate Harris, according to initial findings. The pandemic situation remains worrying, especially in Europe, with an imminent escalation of new Covid-19 infections.

Supported by hopes – dampened by uncertainties

After the recent slide in share prices, the indices on the New York Stock Exchange have recovered. The Dow Jones Industrial closed almost +2% higher at 28 303.46 points and the broad S&P 500 closed with a daily gain of +1.71% at 3 419.45 points. The mood was driven by the hope that Republicans and Democrats in Washington could still manage to get another corona stimulus package off the ground. The background to this is that the Trump administration nevertheless wants to provide emergency aid in the amount of USD 25bn, for example for ailing airlines. The minutes of the Fed's interest rate decision in September, which were published yesterday evening, were also received positively.

Asian stock markets showed mixed trends on Thursday. The MSCI AC Asia Pacific gained about +0.5%, advancing for the fourth consecutive day. In Tokyo, the Nikkei, which comprises 225 stocks, was up around +1%, while in Hong Kong the Hang Seng Index was down around -0.6%. For Europe and Wall Street, the futures signal a firmer start to trading.

Vice presidential debate without clear winner, but Biden extends lead in surveys

It seems difficult to determine who came out better in yesterday's only television duel between US Vice President Mike Pence and the Democratic vice-candidate Kamala Harris, according to initial analyses, but in contrast to the debate between US President Donald Trump and his challenger Joe Biden, the discussion was much more objective, although the questions posed by the moderator were often simply ignored. It should be noted that, according to the latest survey results, Biden was able to extend his leadership over Trump in several contested US states.

FOMC minutes confirm its expansive course

The minutes of the Fed's last monetary policy meeting on September 16, published yesterday evening, confirmed the Fed's long-term expansionary orientation. The members of the Monetary Policy Committee (FOMC) predominantly expect that the current interest rate range of zero to 0.25% will not change significantly until 2023. However, the Fed emphasizes that this is not an “unconditional commitment“ to a specific interest rate path, but that interest rate policy depends on economic developments, and currently also on the pandemic situation.

Ifo survey sees economic recovery threatened by rising corona figures

In a survey of around 950 economists from 110 countries conducted by the Munich-based Ifo Institute, the majority assume that the recovery of the global economy will weaken significantly. Against the background of the Covid-19 infection figures, which are rising again in many places, an average decline in global economic output of -4.4% must be expected. In addition, the recovery next year is likely to be slower than expected, at +3.2%. The economists surveyed cited liquidity support for small and medium-sized enterprises and a strengthening of the healthcare systems as the most effective economic policy measures.

US technology companies in the crosshairs of politics

A recent research report by the US House of Representatives considers the possibility of breaking up certain dominant platforms to ensure fairer competition. The report concludes that while corporations such as Google, Apple, Amazon and Facebook have brought significant benefits to society, “they have abused their market power and turned into the kind of monopolies that were most recently seen in the era of oil barons and railroad magnates.“ This position of power must be restricted and subjected to appropriate supervision, the study report says. In principle, Democrats and Republicans agree that the big tech companies have too much power, but the Republicans argue for strengthening the regulatory authorities, while the Democrats want to pass new antitrust laws.


Economic Indicators October 8

MEZ Country Indicator Last
07:45 SZ Unemployment Rate (September) 3.4%
08:00 GE Exports (August, y/y) +4.7%
08:00 GE Imports (August, y/y) +1.1%
08:45 FR Business Climate Index (September) 105.6
14:30 US Initial Jobless Claims (weekly) 837,000

Earnings Calendar October 13

Country Corporate Period
US JPMorgan Chase Q3
US Citigroup Q3
US Johnson & Johnson


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Source: LGT Bank (Switzerland) Ltd.

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US employment growth remains dynamic at the beginning of the year