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LGT Navigator: Ginsburg succession overshadows US election campaign and weighs on market sentiment

September 21, 2020

The dispute over the succession to the late liberal constitutional judge Ruth Bader Ginsburg is becoming a major issue in the ongoing presidential election campaign in the US and is also causing concern on capital markets, clouding investors' sentiment.

Ginsburg succession overshadows US election campaign and weighs on market sentiment

US President Donald Trump and the Republican majority in the Senate intend to fill the vacant position in the Supreme Court immediately in order to expand the conservative majority in the Supreme Court before the elections ­ and probably also with the intention of having a better hand in a legally disputed election outcome. The Democratic presidential candidate Joe Biden, on the other hand, reiterated his demand that the position to be filled by the winner of the presidential election on November 3 be filled. For the Democrats, it is therefore also of crucial importance to win seats in the Senate during the election. Currently, Republicans hold a majority of 53 of the total 100 Senate seats. In this election, 35 Senate seats will be filled by 23 Republicans and 12 Democrats.

The political dispute over the Supreme Court as well as the stalemate in the dispute over the US corona economic stimulus package is causing a bad mood on Wall Street. On Friday, the most important indices each fell by about one percent. The Dow Jones Industrial started the weekend with a daily loss of -0.88% at 27 657.42 points. The market-wide S&P 500 fell by -1.2% to 3 319.47 points and the Nasdaq 100 dropped by -1.3% to 10 936.98 points. In Asia, stock markets got off to an uneven start to the week. In addition to the political squabbles in Washington, the rising number of Corona cases in Europe and the still fragile pandemic situation, especially in the US, are also putting pressure on investor sentiment. In Tokyo, however, the stock exchange remains closed until Wednesday due to public holidays.

This week, the focus will again be on US Federal Reserve Chairman Jerome Powell, who will be available to answer questions before the US Congress finance committees on Tuesday, Wednesday and Thursday.

US government strives for alliance of Tiktok with Oracle and Walmart

In the dispute over the US business of the Chinese video platform Tiktok, US President Donald Trump has approved an agreement in which Tiktok wants to enter into a partnership with Oracle and Walmart. Oracle declared that it wants to hold a 12.5% stake in the new company and provide a secure cloud service for data on the popular app. Walmart will acquire 7.5% of Tiktok Global and will take care of e-commerce, fulfillment, payments and other services for the new company. The US Department of Commerce has postponed the planned Sunday lockdown of the Tiktok app by one week. The owner of Tiktok, Beijing-based Bytedance, is to retain a stake of around 80% in the company. However, the Chinese government must also agree to a deal. The background to the dispute, which has been smoldering for some time now, is the accusation from the American side that Tiktok is a threat to the national security of the US because the app could be used to create movement profiles of federal officials and spy on companies.

US consumers more optimistic again despite ongoing pandemic

The mood of American consumers improved more than expected in September according to preliminary survey results from the University of Michigan. The confidence barometer climbed from 74.1 to 78.9 points, while analysts had expected an average of 75.0 points. Despite the still difficult pandemic situation in the United States with almost 200 000 fatalities, the surveyed private households assessed their prospects, as well as their current situation, more confidently than in the previous month.

ECB representative pleads for further economic stimulus

In view of the corona crisis, the head of the Spanish central bank, Pablo Hernandez de Cos, and member of the ECB's Governing Council, believes that the central bank has a duty to continue supporting the euro economy with new monetary policy aid after the economic recovery slowed down in August. The ECB may need to add new impetus to achieve its goals, the central banker said. According to the Financial Times, the ECB should consider a review of its pandemic bond purchase program, focusing on how long the program should continue and whether its flexibility could be extended to older programs. Meanwhile, German ECB Director Isabel Schnabel said that the eurozone will have to struggle with the negative economic effects of the corona crisis for a long time to come. It will probably take years before the economic consequences of the crisis are completely overcome. In order to return to sustainable growth, Schnabel said, investments must be made in future areas such as ecological transformation or digital transformation.

Inflation remains non-existent in Japan

Despite the extremely loose monetary policy of the central bank, inflation in Japan remains chronically weak. The inflation rate for the year as a whole was just +0.2% in August and the core inflation rate even fell back into negative territory in August at -0.4%. In the two previous months, core inflation had been zero percent. The virtually non-existent upward pressure on prices is likely to have been further dampened by the latest measure to curb the corona effects. With price reductions in the tourism sector, the government is attempting to at least support domestic tourism and thus the economy in the midst of the corona crisis.



Economic Indicators September 22

MEZ Country Indicator Last
16:00 US Existing Home Sales (August, m/m) +24.7%
16:00 US Existing Home Sales (August, y/y) +5.9%

Earnings Calendar September 24

Country Corporate Period
US Nike Q1


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Source: LGT Bank (Switzerland) Ltd.

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