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LGT Navigator: Renewed risk appetite despite persistently high level of uncertainty

April 20, 2022

In New York and in Asia, equity investors were again more willing to take risks. This was despite the prospect of aggressive monetary tightening in the US in view of persistently high inflation and rising yields. Concerns about the impact of China's lockdown measures on global supply chains and uncertainties about the further development of the unabated war in Ukraine also seem to have receded somewhat into the background. The focus of interest today is in particular the Beige Book of the Federal Reserve as well as a large number of earnings reports and outlooks of listed companies as part of the ongoing earnings season.

Renewed risk appetite despite persistently high level of uncertainty

On the New York Stock Exchange, the stock indices recorded solid daily gains on Tuesday. The Dow Jones Industrial gained +1.45% to 34'911.20 points by the close of trading and the broad S&P 500 traded +1.61% higher than the previous day at 4'462.21 points. On the Nasdaq technology exchange, the indices even rose by about +2%. Better than expected data from the US housing market were positively received. In March, according to +0.4% more building permits were registered compared to the previous month, while analysts had assumed on average a decline of -2.4%. The number of housing starts increased monthly by +0.3% compared with a consensus of -1.6%. Fresh impetus was provided, for example, by the quarterly figures of Johnson & Johnson or IBM, both of which exceeded earnings expectations. The share of the short message service Twitter also continues to cause a stir. The shares yesterday again lost almost -5% after the management took countermeasures for the takeover attempt announced by Tesla CEO Elon Musk.

In Asia, most stock markets posted gains on Wednesday. In Tokyo, the Nikkei 225 gained about one percent, extending gains from the previous day. The weak yen and high commodity prices again caused a deficit in the trade balance in Japan – the eighth month in a row. In Hong Kong, the Hang Seng recovered a small part of the previous day's sharp losses with a gain of around +0.8%.

In bond markets, the yield on ten-year US Treasuries rose to 2.94% and the yield on 30-year Treasuries climbed above 3% for the first time since early 2019. Meanwhile, the yield on ten-year inflation-linked US bonds held near the two-year high reached earlier in the week.

IMF lowers growth forecast for global economy

According to updated forecasts by the International Monetary Fund (IMF), the pace of global growth will slow significantly this year, with inflation rising at the same time. The IMF now forecasts a global growth rate of +3.6% compared with the +4.4% envisaged at the beginning of the year. The IMF sees the main reason for the poorer outlook – especially for Europe and Russia – in the war in Ukraine and the effects felt worldwide. As a result, the latest economic forecasts are also subject to an unusually high degree of uncertainty, the IMF warned. The renewed sharp rise in energy, commodity, and food prices, also due to the Ukraine conflict, is also driving up inflation. This year, the IMF expects an inflation rate of +5.7% in the industrialized countries, compared with the previous forecast of +3.9%. In emerging and developing countries, inflation will average +8.7% – 2.8 percentage points more than last forecast.

Russia remains on board for G20 meeting

Russia will also participate in the meeting of the G20 finance ministers and the International Monetary Fund in Washington. This was agreed by the members after detailed discussions. The important multilateral cooperation must not be sabotaged directly or indirectly by Russia, they said. As a result, however, it will not be possible to find a consensus for a joint final declaration. In addition to the war in Ukraine and its impact on the world economy, the talks will also focus on the global inflation trend.

France pushes for comprehensive oil embargo against Russia

The French government is pleading for a European import ban on Russian oil to dry up the Kremlin's source of foreign currency. “We still have to convince our European partners,” Economy Minister Bruno Le Maire stressed. Germany in particular, as Europe's largest economy, is dependent on Russian energy and would suffer considerable damage as a result, according to warnings from industry. 

  

Economic Indicators April 20

MEZ Country Indicator Last period
08:00 GE Producer Prices (March, y/y) +25.9%
08:30 GE Bundesbank President Nagel speaks
16:00 US Existing Home Sales (March, m/m) -7.2%
20:00 US Fed Beige Book

 

Earnings Calender April 20

Country Company Period
SZ Zur Rose Q1 Sales
FR Danone Q1 Sales
FR Carrefour Q1 Sales
NL Heineken Q1
NL ASML Q1
UK Rio Tinto Q1 Operation Report
US Tesla Q1
US Abbott Laboratories Q1
US Procter & Gamble Q1
US United Airlines Q1
USA Alcoa Q1

 

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Imprint
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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