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LGT Navigator: Caution ahead of central bank decisions

December 14, 2021

In the run-up to the eagerly awaited monetary policy decision by the Federal Reserve and other monetary authorities, investors on the international stock markets were cautious. In view of the significant increase in inflationary pressure in the United States, the financial markets are awaiting signals regarding the pace at which bond purchases will be curtailed and the anticipated turnaround in interest rates next year. On the other hand, the high degree of uncertainty in the pandemic development, given the uncertain impact of the virus variant Omicron, could slow down the motivation of central banks.

Caution ahead of central bank decisions

On the New York Stock Exchange as well as in Asia, investors were cautious after recent gains and ahead of expected central bank decisions and potential economic risks from the Omicron variant. As the Fed could press the pace in reducing quantitative easing (QE), the economically sensitive technology stocks particularly felt increased pressure at the beginning of the week. On the Nasdaq, the indices lost about -1.5%. Meanwhile, the Dow Jones Industrial closed -0.89% lower at 35'650.95 points and the market-wide S&P 500 gave up -0.91% to 4'668.97 points. In Tokyo, the Nikkei 225 index falls about -0.75% and in Hong Kong, the Hang Seng index loses about -1.4%.

Japan Ltd. remains cautiously optimistic

The Japanese central bank's regular business survey, the so-called Tankan report, showed that the companies surveyed remain cautious about the future in the face of supply shortages and higher commodity prices. The main index of sentiment for large manufacturers was unchanged at +18 in December from the last quarterly survey in September. Japan's large companies plan to increase their capital spending by +9.3% in the fiscal year ending March 2022, according to the report, down from a +10.1% increase in the previous survey. While the industrial sector continues to suffer heavily from supply chain problems, confidence in Japan's service sector improved somewhat in the last quarter. The corresponding indicator rose from +2 to +9 points.

Ukraine conflict takes center stage at EU summit

The Russian-Ukrainian border conflict is expected to be the top topic at the European Union leaders' summit in Brussels on Thursday. Germany's new Chancellor Olaf Scholz will attend for the first time. Massive Russian troop movements in recent weeks near the Ukrainian border have sparked great concern in the West that Russia could be planning an invasion. In the run-up, the G7 also reiterated that renewed military aggression against Ukraine on the part of Moscow would entail massive consequences and high costs. In addition to the Ukraine conflict, the EU summit will also focus on pandemic developments. Other topics are expected to include high energy prices in Europe, security and defense policy, and the situation in Belarus.

Economic Indicators December 14

MEZ Country Indicator Last period
08:00 UK Unemployment Rate (October) 4.3%
08:30 SZ Producer Prices (November, y/y) +5.1%
11:00 EZ Industrial Production (October, m/m) -0.2%
14:30 US Producer Prices (November, y/y) +8.6%

 

Earnings Calender December 15

Country Company Period
SZ Roche
GE Metro Year
IT Generali Investor Day
SWE H&M  Q4 Sales
DK Vestas Capital Markets Day

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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