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LGT Navigator: US inflation in focus

February 10, 2022

Stock market sentiment improved again somewhat in midweek, and interest rate fears seem to have been digested for the time being. However, the turnaround in interest rates by the major central banks, above all the Fed, is likely to remain the dominant theme on capital markets. Government bond yields have meanwhile settled at elevated levels. The inflation data from the US, which will be published this afternoon, are now eagerly awaited.

US inflation in focus

In New York, the mood turned on Wednesday and the stock indices continued their recovery. The Dow Jones Industrial gained +0.86% to 35'768.06 points on the previous day. Even stronger gains were posted by the broad S&P 500 (+1.46%) and the tech indices on the Nasdaq (+2.1%).

In addition to the ongoing corporate reporting season, the focus today is particularly on consumer price data from the United States. In December, the US inflation rate reached +7% and analysts expect a further increase to +7.3%. Also, in the core rate, i.e. excluding energy prices, inflation is likely to rise further from +5.5% in December to just under +6%. 

Bundesbank president emphasizes expectations of ECB interest rate turnaround

Joachim Nagel, President of the Bundesbank since the beginning of the year, expects inflationary pressure in Germany to continue throughout the year, with an annual average inflation rate of well over four percent. In 2021, the inflation rate was +3.1%. If the picture does not change by March, the European Central Bank (ECB) will have to react quickly to the high inflation, the Bundesbank chief urged. Experience showed that the economic costs are significantly higher if monetary policy reacts too late. Nagel's comments reinforce the expectation that the ECB will follow the Federal Reserve and initiate the interest rate turnaround later this year.

German exports exceeded pre-crisis levels in 2021

Germany exported more again last year than before the corona crisis. Exports rose +14% year-on-year to EUR 1,375.5 billion, +3.6% above the 2019 level. Germany exported the most to the US, China, and France in 2021. Imports increased by +17.1% to EUR 1,202.2 billion last year, also exceeding the 2019 level, with most imports coming from China. In the corona year 2020, German exports still slumped by around -9% and imports fell by -7%.

Democracies in decline worldwide

According to a recent study by “The Economist”, the proportion of authoritarian-ruled states has risen steadily in recent years and democracies are in retreat worldwide. According to the annual "Democracy Index," just under 46% of the world's population lived in a democracy last year, compared with just under 50% in 2020. In a so-called “full democracy,” the figure was only 6.4% in 2021 (2020: 6.8%). The study concludes that far more than a third of the people live in a dictatorship. Norway and New Zealand receive the highest marks for democracies.


Economic Indicators February 10

MEZ Country Indicator Last period
10:00 UK Bank of England Governor Bailey
11:00 EU Economic Forecasts
14:30 US Consumer Prices (January, m/m) +0.6%
14:30 US Consumer Prices (January, y/y) +7.0%
14:30 US Core Consumer Prices (January, y/y) +5.5%


Earnings Calender February 10

Country Company Period
SZ Credit Suisse Annual
SZ Zurich Insurance Annual
GE Siemens Q1
GE ThyssenKrupp Q1
GE Linde Annual
FR Société Générale Annual
FR Credit Agricole Annual
FR Total Annual
FR Pernod Ricard H1
NL Euronext Annual
LUX ArcelorMittal Annual
DK Vestas Wind Systems Annual
UK Unilever Annual
UK AstraZeneca Annual
US Twitter Q4
US Coca-Cola Q4
US PepsiCo Q4
US Kellogg Q4
US Philip Morris International Q4


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Source: LGT Bank (Switzerland) Ltd.

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