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LGT Navigator: Fear of renewed lockdowns causes restraint

September 23, 2020

The fear of renewed lockdowns to contain the corona pandemic is making investors more cautious. Nonetheless, the stock indices on Wall Street and, to a large extent, in Asia as well, recovered from their recent setback. While in Washington the Republicans are pushing for a quick replacement in the Supreme Court, US Federal Reserve Chairman Powell is calling for more fiscal stimulus.

Fear of renewed lockdowns

On Wall Street, the Dow Jones Industrial closed +0.52% higher than the previous day at 27 288.18 points. At the beginning of the week, the US leading index had at times fallen to its lowest level since the beginning of August due to growing concerns about another pandemic wave. The S&P 500 gained around +1% yesterday, ending the day at 3 315.57 points. Positive impetus was provided by sports goods manufacturer Nike, which is benefiting strongly from online shopping during the pandemic. In the last fiscal quarter, Nike posted a profit of USD 1.5bn, an increase of +11% over the same period last year. The company thus clearly exceeded analysts' expectations, with the share price rising by +16% at times after trading. For the start of trading in Europe, the futures give reason to expect a friendly start.

Fed Chair Powell sees economy on “uncertain path“ and calls for more fiscal stimulus

US Federal Reserve Chairman Jerome Powell believes that the US economy remains on an “uncertain path“ due to the corona crisis. The Fed head stressed at his hearing before Congress that a full economic recovery could only be expected if the pandemic could be brought under control. The Fed is therefore prepared to use the full range of its instruments – for as long as necessary. Powell also called on politicians to do more to stabilize the economy.

US election campaign dominated by dispute over succession in the Supreme Court

The Republicans in the US Senate are pressing for an early vote on the succession to the late Constitutional Judge Ruth Bader Ginsburg. Republican majority leader Mitch McConnell affirmed that the Senate would vote on a Supreme Court nominee nominated by US President Donald Trump before the end of the year. Trump had already announced that he would propose a candidate this week. The constitutional judges are nominated by the president and must be confirmed by a simple majority in the Senate. Since the highest judges are elected for life, this could have far-reaching consequences for the future of the US. Of the nine seats in the Supreme Court, liberals hold only three after Ginsburg's departure, while the five remaining judges are all considered conservative.

Bank of England still refuses negative interest rates for the time being

The British central bank is currently playing out the possibility of negative interest rates in the fight against the economic effects of the corona crisis. According to Governor Andrew Bailey, however, the probability of an effective introduction is currently not given. Negative interest rates are part of the central bank's arsenal, Baily said, but examining the technical possibilities does not yet mean that this step will be taken.

ECB wants to allow green bonds as repo collateral

From 2021, the European Central Bank (ECB) wants to accept so-called green bonds as collateral for its credit transactions. The bonds are to meet the ECB's usual eligibility criteria and the bonds must be linked to the EU's sustainability goals and requirements. The bonds could then also be purchased under the Corona Crisis Program PEPP.

Continued consolidation of the European banking industry is expected

Credit Suisse Group CEO Thomas Gottstein expects consolidation in the European banking sector to continue. In principle, mergers made a lot of sense, as negative interest rates in particular put pressure on banks' earnings. However, the regulatory hurdles are high, Gottstein said. The statements of the CS Chairman are attracting particular attention due to the recent renewed rumors of a possible merger between the two major Swiss banks Credit Suisse and UBS.



Economic Indicators September 23

MEZ Country Indicator Last
09:00 SP GDP Q2 (q/q) -18.5%
09:15 FR IHS Markit PMI Composite (September) 51.6
09:30 GE IHS Markit PMI Composite (September) 54.4
10:00 EZ IHS Markit PMI Composite (September) 51.9
10:30 UK IHS Markit PMI Composite (September) 59.1
15:00 US FHFA Housing Prices Index (July, m/m) +0.9%
15:45 US IHS Markit PMI Composite (September) 54.6

Earnings Calendar October 5

Country Corporate Period
SZ Aryzta Y


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