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LGT Navigator: Yields put pressure on stock markets

January 19, 2022

After a holiday, the US stock markets got off to a late start in the new week and immediately came under pressure. In Asia this morning the negative trend continued. The background is once again primarily interest rate concerns and an unsuccessful start to the corporate reporting season that has just begun. On the bond market, the yield on ten-year US government bonds climbed to 1.89%, reaching its highest level in two years.

Yields put pressure on stock markets

Ahead of the Federal Reserve's next interest rate decision a week from today, interest rate concerns intensified in equity markets around the world. On the New York Stock Exchange, the Dow Jones Industrial and the broad S&P 500 lost between -1.5% and -1.8%. After the quarterly results of the major banks JPMorgan and Citigroup had already been received negatively by investors, the Q4 results of the investment bank Goldman Sachs also disappointed. However, the technology indices on the Nasdaq suffered most from the rising interest rate expectations, which slumped yesterday by about -2.5%. The negative trend continued in Asia this morning and in Tokyo, the 225-stock Nikkei index lost more than three percent at times. At the same time, oil prices rose to their highest level since 2014 following the failure of a pipeline from Iraq to Turkey and palpable geopolitical tensions, particularly over the Ukraine conflict. Higher oil prices further fueled fears that the inflation trend could become entrenched, putting even more pressure on central banks to provide countermeasures.

New York industrial barometer cools noticeably

According to survey results from the New York Fed, sentiment among industrial companies around New York has clouded significantly at the start of the year. The so-called Empire State index fell from plus 32.6 points in the previous month to minus 0.7 points in January, signaling a contraction in economic activity. A much smaller decline to 25.0 points had been expected. This was also the first time in a year and a half that the regional industrial indicator had fallen into negative territory. The Empire State index, together with the Philly Fed index of the Federal Reserve Bank of Philadelphia, is regarded as a leading indicator of sentiment at the national level, each of which finds expression in the ISM industrial purchasing managers' index.

Investors more confident about Germany's economic outlook

According to the latest survey results, investors and analysts regularly surveyed by the Center for European Economic Research (ZEW) expressed more optimism regarding the further development of the German economy. The ZEW index of economic expectations rose significantly more strongly than expected at the beginning of the year from 29.9 points in the previous month to 51.7 points (consensus 32.5). The majority of the financial market experts surveyed assessed the economic outlook for the coming six months as positive and expect the weak phase in the final quarter of 2021 to be overcome soon, commented the ZEW. The same picture was seen regarding the eurozone as a whole. The corresponding indicator of economic expectations improved from 22.6 to 49.4 points in January. In addition, inflation expectations for the eurozone declined again. According to the latest study, 58% of the survey participants expect the inflation rate to decline over the next six months.

German entrepreneurs more pessimistic about China

A recent survey by the German Chamber of Commerce in China shows that a larger number of German companies surveyed are less optimistic about their business prospects in the People's Republic. Thus, it is now only 51% who assess the outlook for their business positively. A year ago, the figure was 66%. 18% of the companies now expect the business climate to deteriorate in the current year. In the previous year, the figure was 9%. Overall, German companies in China are still quite optimistic about the new year and their commitment to the market remains unshaken, but economic policy trends are leaving their mark, commented Clas Neumann, President of the German Chamber of Commerce in China.

Economic Indicators January 19

MEZ Country Indicator Last period
08:00 UK Consumer Prices (December) +5.1%
08:00 UK Core Consumer Prices (December, y/y) +4.0%
08:00 GE Consumer Prices (December, y/y) +5.7%
10:30 UK Producer Prices (December, y/y) +9.1%
14:30 US Housing Starts (December, m/m) +11.8%
14:30 US Building Permits (December, m/m) +3.9%


Earnings Calender January 19

Country Company Period
SZ Richemont Q3 Sales
NL ASML Annual 
UK Burberry Q3 Sales
US Bank of America Q4
US Morgan Stanley Q4
US US Bancorp Q4
US United Health Q4
US Procter & Gamble Q4


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Source: LGT Bank (Switzerland) Ltd.

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