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LGT Navigator: The fear of new lockdowns is increasing

October 28, 2020

Fears of renewed lockdowns in view of the continuing rapid rise in new corona infections and their immediate negative impact on the fragile economic recovery are keeping market sentiment depressed. Meanwhile, the hot phase in the US presidential election campaign is causing increasing nervousness, and the long-awaited US corona aid package now seems to be definitely ending on the long bench.

The fear of renewed lockdowns

US President Donald Trump confirmed yesterday that the long disputed further corona aid package will definitely not be launched until after the elections. “Americans will get the best economic stimulus package they have ever seen after the election“, Trump said. At the beginning of the week, the head of the House of Representatives, Nancy Pelosi, had pressed for an agreement before the election date.

Meanwhile, the US president continued to pour oil on the fire about whether he would accept defeat. “Real polls would show that he would win,“ Trump tweets. The media would suppress this, he said, adding that the the publicly known polls were often fake and had no value. A week before the presidential election, more than 69 million Americans have already cast their votes, which is more than half of all votes cast in the election four years ago.

After heavy losses at the beginning of the week, US stock indices continued to fall on Tuesday. Only the Nasdaq technology exchange was able to stabilize. Against the backdrop of the continued strong increase in the number of Covid-19 cases, particularly in the US and Europe, and the nervousness in the run-up to the US elections, the Dow Jones Industrial closed -0.8% lower at 27 463.19 points. The broad S&P 500 ended the day's trading with a minus of -0.3% at 3 390.68 points. In contrast, the Nasdaq 100 increased by +0.82% to 11 598.95 points. It was only after the close of trading that Microsoft reported a solid Q1 result. A strong cloud business has brought the software group strong growth. Profit increased and exceeded market expectations. In Asia, the uncertain development of the pandemic dampened stock market sentiment.

Asian markets fell on Wednesday due to rapidly rising coronavirus numbers. Investors were reluctant to make major investments due to rising infection rates in the US and Europe. Many countries have registered a record number of corona cases in the last few days and introduced new measures to get the second wave under control quickly. Against the background of growing concerns about the global economic consequences of new pandemic containment measures, futures for Europe's stock exchanges signal a weak start.

US consumers somewhat more skeptical again shortly before the vote

American confidence clouded over again in October. According to a survey by the New York economic research institute The Conference Board, the consumer confidence barometer fell from 101.3 to 100.9 points. Analysts had expected an improvement to 102.0 points. The barometer thus remains far below its level before the outbreak of the corona pandemic. At the beginning of the year, the indicator had stood at just under 132 points. In particular, the expectations of the private households surveyed have clouded over. The corresponding index fell significantly from 102.9 to 98.4 points.

Property prices in the US rise sharply despite the corona crisis

The broad S&P/Case-Shiller Index showed that house prices in the 20 largest metropolitan areas in the United States rose by an average of +5.2% in August compared to the previous year. This was the strongest rise in the indicator in almost two years. On a month-on-month comparison, prices rose by +1.1%. According to experts, the following factors are having a positive effect on the American housing market: persistently low interest rates, home ownership as security and the growing demand for housing due to the increased use of home offices, as well as a limited supply.

Good order situation in the US industry

The order intake for durable goods (products with a life of at least three years) increased surprisingly strongly in the US in September. As the Department of Commerce reported yesterday, September saw +1.9% more orders than the previous month, the fifth consecutive monthly increase. Economists warned of a much more moderate increase of +0.4%. Orders for civil capital goods excluding aircraft, which are considered to be an important indicator for corporate investment, rose by +1.0% on a monthly basis, after a plus of +2.1% had already been recorded in the previous month.

Expectations of German exporters clouded again

According to a current study by the Munich-based economic research institute Ifo, the outlook for German export companies deteriorated again in October. After reaching its highest level since 2018 in the previous month, the indicator fell by 3.7 points to 6.6 points. According to Ifo, declining exports are expected in both the food and beverage industry and the clothing sector. Manufacturers of electronic products and the chemical industry are more optimistic about the future. Despite the decline, export expectations remain well above the low observed in April.



Economic Indicators October 28

MEZ Country Indicator Last
08:45 FR Consumer Confidence (October) 95.0
13:30 US Trade Balance (September, m/m) -USD 83.1bn

Earnings Calendar October 28

Country Corporate Period
GE Beiersdorf Q3
GE Deutsche Bank Q3
GE Deutsche Börse Q3
IT Eni Q3
UK GlaxoSmithKline Q3
US Alphabet Q3
US General Electric Q3


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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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