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LGT Navigator: Current corona situation clouds hopeful view into the future

November 19, 2020

New data on the Covid-19 vaccine from Pfizer/BioNTech confirm investors' hopes for a foreseeable break from the crisis mode, but the tense pandemic situation continues to cause great uncertainty in the present. Meanwhile, President Trump is still holding on to power and is trying to influence the election results in his favor with legal moves.

Current corona situation clouds hopeful view into the future

US pharma giant Pfizer and its German partner company BioNTech yesterday again presented new data following the completion of the last analyses in the testing of their vaccine. According to these data, the corona vaccine is expected to have an efficacy of up to 95% and to provide similar protection across all age groups. For emergency approval in the US, the necessary safety of the vaccine is guaranteed. In the end, however, the promising news could not make up for concerns about the further development of the pandemic. In New York, for example, schools are being closed again in view of the sharp rise in Covid-19 cases. At the same time, the ongoing power poker in Washington is also keeping investors in check. Whether the recount in Wisconsin or the lawsuit in Pennsylvania initiated by the incumbent president Donald Trump will have a decisive influence on the election results seems highly unlikely, also in view of the time pressure.

On the US stock markets, the positive news on the corona vaccine initially created a good mood, but the indices fell significantly at the end of trading. The Dow Jones Industrial and the broad-based S&P 500 both closed -1.16% lower at 29 438.42 points and 3 567.79 points, respectively. In Asia, no uniform trend was discernible this morning. While prices fell in Japan and Hong Kong, the indices in China and Australia were moderately up. For the European stock markets, the futures are pointing to a slightly negative start.

Low interest rates support construction activity in the US even during the crisis

In the United States, more new homes were built in October than expected. New construction activity rose by +4.9% in October, while analysts had expected a plus of +2.5%. In addition, according to revised figures, the increase in construction starts in September was, at +6.3%, significantly stronger than initially calculated at +1.9%. By contrast, the number of building permits issued for future construction activity remained unchanged in October. This follows a strong increase of +4.7% in September. Demand for residential real estate in the midst of the corona crisis is being supported above all by record low key interest rates, which are also responsible for lower mortgage interest rates.

Solid order situation in German industry

The German manufacturing sector recorded +1% more orders in September than in the previous month and appears to be well secured with orders for the near future. For example, orders as of September are sufficient for up to 6.4 months, which means that even if orders are halted, companies still have a good half year's work to do. The order books are particularly well filled at manufacturers of capital goods, who have an order backlog of 9.2 months on their books. By contrast, orders at manufacturers of consumer goods only last for 2.5 months.

Inflationary pressure in the UK slightly higher

In the United Kingdom, consumer prices rose by +0.7% year-on-year in October, according to the ONS statistics office. Higher food costs, clothing and transport were responsible for the price increase. In September, the annual inflation rate was +0.5% and in August it was only +0.2%. The core rate, i.e. excluding energy and food prices, which are often subject to fluctuations, also rose slightly from +1.3% to +1.5%.

UK government promises green investment program

British Prime Minister Boris Johnson wants to make substantial investments to gear the economy more towards sustainability and pay greater attention to innovation and environmental protection. This should make Great Britain climate-neutral by 2050. To this end, the government plans to provide around GBP 12bn (EUR 13.5bn) by 2030. The focus will be on promoting innovative technologies or investing in electro mobility. This should also create up to 250 000 new jobs.



Economic Indicators November 19

MEZ Country Indicator Last
08:00 SZ Exports (October, m/m) -2.1%
08:00 SZ Imports (October, m/m) +2.1%
14:30 US Philly Fed Manufacturing (November) 32.3
16:00 US Leading Indicator (October, m/m) +0.7%
16:00 US Existing Home Sales (October, m/m) +9.4%

Earnings Calendar November 24

Country Corporate Period
UK Compass Group Y
IE Medtronic Q2


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