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LGT Navigator: Known uncertainty factors dominate stock market sentiment

January 24, 2022

In the run-up to the US Federal Reserve's decision on monetary policy direction on Wednesday, stock market sentiment remains tense. Higher government bond yields, record high inflation rates, some disappointments at the start of the corporate reporting season and the escalating Ukraine conflict are causing nervousness on the trading floor. In addition to the Fed's interest rate decision, several important quarterly reports from well-known blue chips will also provide fresh impetus in the coming days.

Known uncertainty factors dominate stock market sentiment

On the New York Stock Exchange, the stock indices continued their series of losses at the end of the week on Friday. In addition to the anticipated interest rate turnaround of the Federal Reserve, a disappointing outlook of the streaming provider Netflix also caused bad mood among investors. As a result, the indices on the Nasdaq technology exchange sank by a good two and a half percent and recorded the lowest level since the beginning of October. The Dow lost -1.3% on Friday, posting a loss of -4.6% for the week. The S&P 500 fell nearly two percent late last week, dropping to its lowest level since mid-October. In Asia, most stock indices trended inconsistently at the start of the week. While Tokyo is up moderately, the Hong Kong Stock Exchange is down about one percent.

This week, the ongoing corporate reporting season reaches a first peak. Thus, today IBM presents the quarterly results, followed by Microsoft, Johnson & Johnson and Logitech on Tuesday, Intel and Tesla on Wednesday, Apple, LVMH or SAP on Thursday and Givaudan on Friday. Also, in focus today is the presidential election in Italy (around 3 p.m. CET).

Tense diplomacy in the Ukraine conflict

At the highly anticipated meeting of US Secretary of State Antony Blinken and his Russian counterpart Sergey Lavrov in Geneva, the fronts remained hardened. The US secretary of state issued an urgent warning to Moscow against an invasion of Ukraine. The United States and European allies will stand firmly alongside Ukraine and support its sovereignty and territorial integrity, he said. “We will respond quickly, hard, and with unified force,” Blinken warned. Meanwhile, the US government reduced its embassy presence in Kiev considering the tense situation. According to a report in the New York Times, US President Joe Biden is now said to be considering sending US soldiers to NATO allies in the Baltics and Eastern Europe. In essence, the US is demanding a withdrawal of Russian troops massed on the Ukrainian border, while Russia is insisting on security guarantees and an end to NATO's eastward expansion.

US economy on track

The leading indicator from New York-based economic research firm The Conference Board signaled a continued solid economic trend in the United States. With an increase of +0.8%, the composite index for the economic outlook in the US improved somewhat more strongly than expected on a six-month horizon.

Lower government debt in the EU and the eurozone

According to the European statistics authority Eurostat, government public debt declined in the third quarter of 2021. As a percentage of gross domestic product (GDP), the debt mountain fell from 98.3%, or EUR 11.73 trillion, in the second quarter of last year to 97.7%, or EUR 11.61 trillion. In the EU, the government debt ratio fell from 90.9%, or EUR 12.74 trillion, to 90.1%, or EUR 12.62 trillion. The lowest debt ratios were recorded in Estonia (19.6%), Bulgaria (24.2%) and Luxembourg (25.3%). The highest ratios were recorded in Greece (200.7%), Italy (155.3%), Portugal (130.5%), Spain (121.8%), France (116.0%) and Belgium (111.4%).

Economic Indicators January 24

MEZ Country Indicator Last period
09:15 FR PMI Composite (January) 55.8
09.30 GE PMI Composite (January) 49.9
10:00 EZ PMI Composite (January) 53.3
10:00 UK PMI Composite (January) 53.6
14:30 US Chicago Fed Activity Index (December) +0.37
15:45 US PMI Composite (January) 57.0

 

Earnings Calender January 24

Country Company Period
NL Philips Annual 
US IBM Q4
US Halliburton Q4

 

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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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