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LGT Navigator: US retailers shine in corona crisis

August 19, 2020

Asian equities in some cases rose to their highest level in seven months at midweek, driven by positive indications from the New York Stock Exchange. Besides the continued strong demand for tech stocks, US real estate market data on the one hand and the quarterly results of US retail group Walmart and DIY chain Home Depot on the other provided positive impetus. Both retailers were able to benefit from a significant increase in customer demand during the corona crisis in the second quarter and exceeded analysts' expectations. Meanwhile, the tone in the US presidential election campaign is becoming much sharper with the Democratic Party Conference that started at the beginning of the week.

US retailers shine in corona crisis

US retail giant Walmart benefited from strong online business in the second quarter, which flourished due to the corona lockdown. Walmart significantly exceeded market expectations in terms of both operating profit (USD 6.1bn; +8.5% over the previous year) and sales (USD 137.7bn; +5.6%). At USD 1.56, adjusted earnings per share were also well above analysts' consensus of USD 1.25. The share initially rose strongly by about -6%, but then had to give up the gains in the course of trading. Thanks to strong demand during the lockdown, the US home improvement chain Home Depot was also able to post strong gains in earnings and sales, clearly outperforming analysts' forecasts. Home Depot increased its net profit in Q2 from USD 3.5bn in the previous year to USD 4.33bn. The group earned USD 4.02 per share (consensus USD 3.64). Revenues climbed from USD 30.8bn to USD 38 billion (consensus USD 34.5bn).

On Wall Street, the focus was once again on technology stocks. While the Dow Jones Industrial Index lost ground slightly (-0.24%), the S&P 500, in the wake of the Nasdaq, reached a new record high at 3 395.0 points and closed +0.23% higher at 3 389.78. The technology-heavy Nasdaq 100 gained +0.98% and also set a new record at 11 421.0 points. In Asia, most indices followed the positive trend and in some cases reached their highest levels in seven months. The Nikkei index in Tokyo, which comprises 225 stocks, rose by +0.32% to 23 124.28 points.

Trump intensifies the campaign tone

In reaction to the Democratic Party Conference that began at the beginning of the week, US President Donald Trump has further tightened the tone in the current presidential election campaign. He attacked not only the former First Lady Michelle Obama, who spoke clear words against the President at the virtual Democratic Party Congress, but also against his predecessor. The Obama/Biden administration had been the most corrupt in history, Trump twittered.

US real estate market no longer much affected by the crisis

The crisis on the American housing market seems to have already been overcome. The latest data on new construction starts and building permits were surprisingly strong in July. The number of newly started construction projects rose by +22.6% month-on-month. Building permits, which are indicative of future construction activity, rose by +18.8% on a monthly basis in the reporting period. This means that construction starts have largely made up for the decline in the corona crisis, and building permits have increased by about half.

New attempt in Brexit negotiations

Talks between the negotiators of the European Union and Great Britain on a follow-up agreement for the period after the Brexit transition phase were resumed yesterday in Brussels. So far, the rounds of negotiations have been largely fruitless, and according to experts, a breakthrough should not be expected now either. There is still disagreement on the EU's demands for a level playing field and on the subject of fisheries. If no follow-up agreement is reached, there is a threat of a hard economic Brexit with tariffs and trade barriers. EU chief negotiator Michel Barnier was able to offer the British a trade agreement that would allow Great Britain to export goods to the domestic market without tariffs and quantitative restrictions. In return, however, Brussels is demanding equally high environmental and social standards as well as uniform rules for economic promotion in order to avoid distortions of competition. This was rejected by British delegation leader David Frost.



Economic Indicators August 19

MEZ Country Indicator Last
10:30 UK Consumer Prices (July, m/m) +0.1%
10:30 UK Consumer Prices (July, y/y) +0.6%
10:30 UK Core Consumer Prices (July, y/y) +1.4%
11:00 EZ Consumer Prices (July, y/y) +0.3%

Earnings Calendar August 21

Country Corporate Period
US Deere Q3


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Source: LGT Bank (Switzerland) Ltd.

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