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LGT Navigator: US electoral process creates longer lasting uncertainty

November 13, 2020

Despite the resistance of incumbent President Trump, President-elect Biden is continuing the transition of power and putting together his future government. Until the individual US states certify the final results of the election, the designated electors cast their votes for the future president and finally the result of the vote in Congress is announced on January 6, investors are faced with increased uncertainty.

U.S. election procedure causes long lasting uncertainty

While Donald Trump and the Republican leadership continue to try to cast doubt on the election results, and in particular to cast legal doubts on the legitimacy of the postal vote, there seems to be no substantial evidence of irregularities so far. According to the state's Minister of the Interior, Brad Raffensperger, there are also no indications of irregularities in the hard-fought swing state Georgia. In the southern state, because of the extremely close outcome of the presidential election - Biden is leading with about 14 000 votes - recounts are currently being done by hand. The count should be completed by November 20. The southern state is not only in the spotlight in the presidential election campaign, but also in the race for the important majority in the US Senate. It is only at the beginning of January that run-off elections for the last two Senate seats are held. It is currently assumed that the Republicans will be able to defend their position of power with a victory in Georgia.

On the New York Stock Exchange yesterday, profit-taking predominated after a previously strong stock market month of November. The Dow Jones Industrial closed -1.13% lower at 29 065 points and at times even fell back below the 29 000 mark. Since the beginning of the month, however, the Dow has risen by almost +13% at its peak. The S&P 500 fell by -1.05% to 3 535 points and the technology-heavy Nasdaq 100 also ended the day's trading -0.46% lower. In Asia, most indices also trended south this morning, driven by corona worries and uncertainty in the US election process. In Tokyo and Hong Kong, the main indices are trading around -0.5% lower. Futures also signal a negative start on European equity markets. 

Top central bankers warn against early euphoria for Covid-19 vaccine

US Federal Reserve Chairman Jerome Powell, ECB President Christine Lagarde and Bank of England Governor Andrew Bailey warned at a Federal Reserve meeting that it is currently too early to say how progress in the global search for a Covid-19 vaccine will affect the economy, especially given the rise in infection cases and the re-imposed lockdowns that will weaken the recent economic recovery.

Price pressure in the US eased somewhat in October

US consumer prices rose by +1.2% year-on-year in October. Inflation has thus eased from the +1.4% recorded in September, and at +1.5% core inflation, excluding energy and food costs, remains well below the Fed's target. Under the new strategy, the Federal Reserve will also accept an inflation rate above the 2% mark for a longer period of time. This gives the Fed even more scope for monetary policy easing. 

US initial applications for unemployment fall to a seven-month low

Despite the ongoing dramatic pandemic situation in many parts of the US, the latest labor market data pointed to a further slow recovery. Last week, a total of 709 000 Americans made their first application for unemployment benefits, 48 000 fewer than the week before. The current average number of applications dropped to its lowest level in seven months.

Inflation in Germany remains in negative territory

In October, German consumer prices fell by -0.5% for the year as a whole. Negative annual inflation was already observed in July and September. The temporary reduction in the value-added tax in order to contain the corona crisis is likely to have dampened inflationary pressures. 

British economy can almost make up for the slump in Q3 in Q2

In the third quarter, the UK economy showed a strong recovery from the record collapse in spring caused by corona. Economic output rose by +15.5% compared with the previous quarter and was thus only slightly below the market consensus of +15.8%. In the second quarter, British gross domestic product still fell by -19.8% due to the negative economic consequences of the lockdown. According to Finance Minister Rihsi Sunak, however, the outlook remains bleak, on the one hand because of the renewed lockdown and on the other hand because of the threat of a hard Brexit at the end of the year.



Economic Indicators November 13

MEZ Country Indicator Last
09:00 SP Consumer Prices (October, y/y) -1.0%
11:00 EZ Trade Balance (September) +EUR 21.91bn
14:30 US Producer Prices (October, y/y) +0.4%
14:30 US Core Producer Prices (October, y/y) +1.2%

Earnings Calendar November 13

Country Corporate Period
FR GDF Suez Q3


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Source: LGT Bank (Switzerland) Ltd.

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