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LGT Navigator: Risk appetite in tech stocks continues to drive stock markets

August 25, 2020

A return to greater risk appetite and the continued strong demand for technology stocks as well as news positively interpreted by investors regarding the emergency approval by the US Food and Drug Administration (FDA) for a Covid-19 immunoplasm therapy provided a positive start to the week on the stock markets.

Risk appetite for tech stocks drives equity markets further

The shares of Apple, Amazon, Alphabet and Tesla all reached new record highs during the course of the day yesterday, which also brought the technology-heavy Nasdaq 100 index and the Nasdaq Composite to new all-time highs. As a result, the market-wide S&P 500 increased by almost +1% and also reached another record high in daily trading. The stock market sentiment was also supported by hopes for the plasma treatment options for corona infections announced by the US and a rapid approval for a corona vaccine candidate from AstraZeneca. The Dow Jones Industrial benchmark index rose +1.35% to 28 308.46 points at the beginning of the week, the highest level since the end of February. In Asia, the positive stock market trend continued on most exchanges. In Tokyo, the Nikkei index, which comprises 225 stocks, rose +1.66% to 23 368.21 points.

Republican Party Conference under the slogan “four more years“

After last week's political scene was dominated by the Democrats with the nomination of their presidential candidate, Joe Biden, the Republican Party started their convention yesterday in Charlotte (North Carolina). Due to the corona pandemic, Republicans are also forced to hold most of the meeting via video conferencing. The candidacy of incumbent Donald Trump has of course been confirmed, but the President and his party are hoping for a fresh tailwind for the election on November 3rd, about two and a half months from now. As an election promise, Trump is expected to promise further tax cuts and the creation of 10 million new jobs within ten months. Trump also wants to end the dependence of the US on China and thus recover lost jobs. In his second term of office, the president also wants to further tighten measures against illegal immigration.

Economic recovery in the US loses momentum

According to the National Activity Index (CFNAI) published monthly by the Federal Reserve in Chicago, economic activity in the US weakened again in July, after a clear recovery in May and June from the corona-related record low in April. The indicator fell from +5.33 points in June to +1.18 points, but is still above the zero mark, which generally indicates growth in the economy as a whole.

Paris expects economic weakness to persist

Despite short-term recovery tendencies, the French government is expecting a decline in gross domestic product in the current year. Uncertainties not only regarding the corona crisis, but also the elections in the US and the Brexit negotiations will continue to weigh on the second largest economy in the euro zone, commented French Finance Minister Bruno Le Maire. In its official forecast, Emanuel Macron's government expects economic output to slump by -11% this year.

Rome expects strong recovery in the third quarter

According to the Minister of Economy Roberto Gualtieri, the Italian government is expecting a “very strong“ recovery in the current third quarter after the corona shock and a GDP slump of -12.4% in the second quarter. In the government's current forecast, economic output is expected to decline by -8% in 2020. However, the EU Commission in Brussels does not believe the Italian economy is capable of achieving this and is currently forecasting a decline of -11.2% in the current year.

 

 

Economic Indicators August 25

MEZ Country Indicator Last
08:00 GE GDP Q2 (revision, q/q) -10.1%
10:00 GE Ifo Business Climate Index 90.5
10:00 GE Ifo Expectations Index 97.0
10:00 GE Ifo Current Situation Index 84.5
15:00 US FHFA Housing Prices Index -0.3%
16:00 US Consumer Confidence (The Conference Board) 92.6

Earnings Calendar August 25

Country Corporate Period
SZ Swiss Prime Site H1
IE Medtronic Q1

 

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Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
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