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LGT Navigator: US Fed: Let’s talk about tapering

June 22, 2021

Yesterday saw a rebound in the US stock market after sensitive losses and profit-taking dominated last week with the tighter tone of the Federal Reserve. Investors now appear to have digested the change in policy and are turning their eyes to higher inflation and tighter monetary policy.

Federal Reserve

The debate over the partial winding down of the massive stimulus measures was intense among US Federal Reserve officials on Monday. Two Fed officials stated their support for ending the USD 120bn in monthly bond purchases sooner rather than later. However, this agenda item appears to have only begun and should gain momentum in the near term. In a statement released on Monday, Fed Chairman Jerome Powell let it be known that the US economy continues to show “continued improvement”, further gains in the labor market are likely, and he sees inflation falling from current high levels. The chairman is keeping mum about scaling back his extensive use of exotic money market instruments. He is scheduled to address the US House of Representatives on Tuesday regarding the Corona crisis.

China toughens course against cryptocurrencies

Cryptocurrencies such as Bitcoin also continued to fall at the start of the week, after already recording losses over the weekend. Experts pointed to the increasingly harsh course that the Chinese government is taking against digital currencies. For example, the Chinese central bank announced on Monday that domestic banks as well as fintech company Ant Group had been ordered to stop offering crypto trading services. According to the statement, the step is primarily intended to prevent speculation with digital currencies as well as criminal activities. The People's Republic is also taking rigorous action against producers of digital currencies, as numerous reports from various provinces showed last week. China has been developing its own digital currency, the digital yuan, for some time. Unlike private sector crypto assets, it will be subject to state control. Bitcoin fell to around USD 31,300 on Monday after reaching a high of almost USD 65,000 in April.

Summer Olympics with spectators

The Summer Olympics in Japan are not expected to take place in front of empty stands. The organizers will allow up to 10,000 local spectators at the competitions, and the stadiums may be filled to no more than half capacity. The condition, however, is that the infection situation does not worsen. The gates will remain closed to foreign visitors, as the organizing committee had already decided in March. With this decision, the organizers are turning against the advice of Shigeru Omi, Japan's top government advisor, who is in favor of ghost games. A large part of the Japanese population is also skeptical about the Summer Games in Tokyo and fears that the number of infections could rise again. Because of the pandemic, the major event has already been postponed by a year. The opening ceremony is now scheduled for July 23.



Economic Indicators June 22

MEZ Country Indicator Last period
16:00 US Existing home sales (m/m, May) -2.7%
20:00 US Testimony of Fed Chair Jerome Powell


Earnings Calender June 23

Country Company Period
UK GlaxoSmithKline Investor Day
NL ASML Investor Day
US Johnson & Johnson  ESG Investor Update


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