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LGT Navigator: Worries cannot be shaken off

August 31, 2022

Economic and inflation concerns remain dominant on the capital markets and are keeping investor sentiment subdued. The scenario of further rising interest rates coupled with persistently high inflation and a possible “hard landing” of the global economy is accordingly causing nervousness. On Wall Street, the downward trend continued after the slump last Friday and further losses at the beginning of the week, and the mood on Asia's stock exchanges also remained gloomy. 

Worries cannot be shaken off

The Dow Jones Industrial closed -0.96% lower at 31,790.87 points on Tuesday, trading at the levels of late July. The S&P 500 fell 1.1% to 3,986.16 points and on the Nasdaq technology exchange, the indices fell by about -1.2%. Even a slight improvement in consumer sentiment in the US did not contribute to a brightening of sentiment on the stock market floor.

Stocks in the Asia-Pacific region fell in midweek, following the negative guidance from Wall Street. In China, the official purchasing managers' index for the manufacturing sector remained in negative territory at 49.4 points in August, respectively below 50 points signaled a contraction of the sector.

US consumer confidence brightens somewhat

According to the Conference Board market research institute, the mood of American private households improved more than expected in August. The consumer confidence barometer rose by 7.9 points month-on-month to 103.2 (consensus 98.0). This is the first time in four months that the indicator has risen again. On a positive note, economic expectations as well as assessments of the current situation were assessed more optimistically.

Continued cooling on the US real estate market

According to the regular report by S&P/CaseShiller, price growth in the US real estate market continued to slow in the summer but remains high with double-digit growth rates. In the 20 major metropolitan areas of the US, house prices rose by +18.6% over the year in June. In the previous month, the increase was still +20.5%. On a month-over-month basis, home prices still increased +0.4% in June, down from +1.2% in May. S&P/CaseShiller commented, "The rise in prime and mortgage rates tightened economic conditions and the US housing market has been tending toward weakness for some time, as other housing market indicators have shown.

Sentiment in the eurozone is becoming increasingly gloomy

Economic sentiment in the euro zone clouded over for the third month in a row and more than expected in August, according to the Economic Sentiment Indicator (ESI) compiled monthly by the EU Commission. The barometer dropped from 98.9 to 97.6 points - the lowest level since February 2021. Analysts had expected an average index reading of 98.0 points. The background to this is primarily the increasingly noticeable energy crisis in Europe, ongoing supply chain problems and the ongoing war in Ukraine.

Inflationary pressure in Germany intensified again

Consumer price inflation in Germany accelerated again in August. On an annual basis, consumer prices rose by +7.9% compared with an inflation rate of +7.5% in the previous month. Inflationary pressure in Germany thus eased only briefly. Compared with the previous month, the cost of living in Europe's largest economy still increased by +0.3% after a rise of +0.9% in July.

Spain reports slightly lower inflation

In Spain, inflation weakened somewhat in August. Compared with a year earlier, consumer prices rose by +10.3%. In July, the inflation rate was still +10.7%. On a monthly comparison, the cost of living increased only minimally by +0.1%. Slightly lower fuel prices had a positive impact, but food and electricity became significantly more expensive.

Outlook for the Swiss economy remains gloomy

With a decline of four points to 86.5 points, the economic barometer of the Swiss Federal Institute of Technology (ETH) Zurich's economic research center signaled a continued deterioration in the outlook for the Swiss economy. The KOF economic barometer is thus clearly below the long-term average of 100 points. According to the KOF, an unabated downward trend has now been apparent for four months since the last peak in May 2021. Indicators from the consumer sector were particularly responsible for the decline. The industrial and construction sectors are also sending out negative signals.

Economic Indicators August 31

MEZ Country Indicator Last period
08:00 GE Import Prices (July, y/y) +29.9%
08:45 FR GDP Q2 (q/q) +0.5%
08:45 FR Consumer Prices (August) +6.8%
09:00 AUT GDP Q2 (q/q) +0.5%
09:55 GE Unemployment Rate (August) 5.4%
10:00 SZ ZEW Economic Expectations (August) -57.2
11:00 IT Consumer Prices (August, y/y) +8.4%
11:00 EZ Consumer Prices (August, y/y) +8.9%
11:00 EZ Core Consumer Prices (August, y/y) +5.1%
14:15 US ADP Private Employment (July) +128,000
15:45 US Chicago PMI (August)  52.1

 

Earnings Calender August 31

Country Company Period
SZ ABB Capital Market Day

 

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Imprint
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

 

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