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LGT Navigator: All eyes on Fed Chairman Powell

August 27, 2021

The financial markets are eagerly awaiting the comments of US Federal Reserve Chairman Jerome Powell at this year's Jackson Hole Central Bank Symposium. Investors are hoping that the Fed chief will provide some clues as to when the central bank will start tapering, respectively reducing its massive monetary stimulus.

All eyes on Fed Governor J. Powell

Fed Chairman Jerome Powell will have no interest in causing unrest or even panic on the capital markets. The Fed head is rather likely to try to cautiously prepare the markets for an imminent turnaround in monetary policy. In view of the economic outlook, which is fraught with great uncertainty due to the ongoing Corona pandemic, and the recent increase in indications of a weakening of the economic recovery, the Fed could well signal a continued wait-and-see attitude. Powell's highly anticipated speech is scheduled for 16:00 (CET).

And he New York Stock Exchange, investors were cautious before the speech by Fed Chairman Powell, as was to be expected. By the close of trading, the Dow Jones Industrial lost -0.54% and exited the day's trading at 35,213.12 points. The S&P 500 also closed -0.58% lower than the previous day at 4,470 points. On the technology exchange Nasdaq, the daily losses were also around -0.6%. On the Asian stock markets, the indices trended inconsistently on Friday and on Europe's stock markets, investors are likely to remain cautious ahead of the Fed Chairman's speech.

US economy grows slightly stronger than expected in Q2

According to a revision, GDP growth in the US was slightly stronger in the second quarter at an annualized +6.6% than initially estimated at +6.5%. Economic growth thus accelerated slightly compared with the first quarter (+6.3%). The world's largest economy was supported in the second quarter primarily by private consumption, which grew at an annualized rate of just under +12%. However, bottlenecks in the supply of construction materials, which resulted in a significant decline in construction investment, had a negative impact.

ECB remains relaxed about inflation outlook

According to the minutes of the European Central Bank’s last interest rate decision on July 22, published yesterday, there was broad agreement in the top monetary policy body that the inflation outlook had improved. However, risks to the inflation outlook in the near term “remain increasing and tilted to the upside.”  However, the Governing Council will take another in-depth look at the outlook at its next meeting on September 9, once the new projections prepared by experts are available, the minutes said.

Consumer sentiment in Germany is deteriorating

According to the latest results of the GfK Institute's monthly consumer survey, the mood of German consumers has deteriorated with a view to September. Accordingly, the GfK consumer climate index fell from minus 0.4 to minus 1.2 points. On the one hand, the uncertainty about the further development of the pandemic and, on the other hand, the increased inflationary pressure, respectively rising consumer prices, are burdening, commented the Nuremberg-based institute. Most recently, the inflation rate in Germany rose to +3.8%.


Economic Indicators August 27

MEZ Country Indicator Last period
08:00 AUT GDP Q2 (q/q) +4.3%
08:00 GE Import Prices (July, y/y) +12.9%
08:45 FR Consumer Confidence (August) 101.0
10:00 IT Business Climate (August) 116.6
14:30 US Consumer Spending (July, m/m) +1.0%
14:30 US Personal Income (July, m/m) +0.1%
16:00 US Fed Governor Powell Speach Jackson Hole Symposium
16:00 US Consumer Sentiment University Michigan  70.2


Earnings Calender August 30

Country Company Period
GE DZ Bank  H1
USA Zoom Video Communications Q2


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Source: LGT Bank (Switzerland) Ltd.

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