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LGT Navigator: US gets serious about climate turnaround and tax hikes under Biden

April 23, 2021

At the virtual climate summit, the countries involved, and in particular US President Biden, at least expressed their willingness to step up measures to curb global warming. In stark contrast to the previous administration under Trump, the United States in particular are now calling on the world to act more decisively and more quickly on climate protection. At the same time, Biden also wants to get serious about financing the immense fiscal expenditures and is holding out the prospect of tax increases. Meanwhile, the ECB confirmed its course, as expected, and central bank chief Lagarde gave no indication that monetary policy would be adjusted in the foreseeable future.

USA gets serious about climate turnaround and tax hikes under Biden

In New York, the Biden administration's plans to increase taxes, especially on capital gains, caused losses. The Dow Jones Industrial fell by almost one percent to 33'815.90 points (-0.94%) and the S&P 500 also lost -0.92%; closing at 4'134.98 points. On the technology exchange Nasdaq, the losses were even somewhat stronger: the Nasdaq 100 closed -1.24% lower at 13'762.36 points. The US government wants to target especially wealthy Americans (over USD 1 million) and finance the massive fiscal packages and higher social spending with a practical doubling of the capital gains tax to around 40%. On Asia's stock exchanges, the trend remained mixed. While the Nikkei 225 index in Tokyo loses something -0.8%, the Hang Seng index in Hong Kong trades just under +0.7% in the plus. For the European stock markets, the futures signal a slightly lower opening. The focus remains on the ongoing corporate earnings season.

Climate summit: US President calls for decisive and rapid action

US President Joe Biden has called on the participating heads of state and government from about 40 countries to act decisively and quickly against climate change on the launch of the online climate summit. Contrary to his predecessor, Biden said the science is undeniable and the cost of doing nothing is getting higher. “We must act quickly to meet these challenges,” Biden warned. In addition, the 46th American President said he is convinced that climate action also offers economic opportunities, such as in infrastructure measures or the expansion of electric mobility. Under Biden, the US aims to halve its greenhouse gas emissions by the end of the decade compared with 2005 levels, and to push CO2 emissions to net zero by 2050 at the latest. China's State and Party leader Xi Jinping pledged to gradually reduce coal consumption from 2025 and achieve carbon neutrality by 2060.

2020 was warmest year in Europe since records began

Last year, temperatures in Europe reached their highest ever recorded levels on average. According to the EU's Copernicus European Climate Change Service (C3S), the average temperature in the winter half-year was 3.4 degrees Celsius above the average of the last three decades. It was particularly warm in northeastern Europe. But globally, 2020 was also one of the three warmest years on record, according to the monthly European State of the Climate Report published yesterday.

ECB signals no change in policy

The European Central Bank (ECB) reaffirmed its expansionary monetary policy stance, as expected in the capital markets, leaving key interest rates at record lows and its forward guidance unchanged. According to the ECB, key interest rates are expected to remain at their current level or lower until it is determined that the inflation outlook over its projection horizon is clearly approaching a level that is sufficiently close to, but below, two percent. In principle, the ECB stated its readiness to adjust all instruments if necessary, to ensure a durable convergence of inflation to the target range. ECB President Christine Lagarde pointed out in the press conference that it would be premature at this stage to discuss a reduction in bond purchases under the PEPP pandemic program. Overall, she said, current financing conditions were largely unchanged compared with March. On the exchange rate development of the euro, Lagarde said neutrally that exchange rates were not a policy objective of the ECB, but that the central bank was closely monitoring euro developments because of the implications for inflation. 

Positive US economic signals

The economic outlook has improved strongly in the US, according to leading indicators released yesterday. With a much stronger than expected increase of +1.3% in March (consensus +1.0%), the composite index of the economic research institute The Conference Board signals a strengthening growth trend for the next six months.

The weekly labor market data provided positive accents. According to the Department of Labor, 547'000 initial claims for unemployment benefits were filed in the week ended April 17, 39'000 fewer than in the previous week. Analysts had expected an increase to 610'000 after the sharp decline in the previous week. The number of initial claims is thus as low as at the beginning of the corona crisis in March 2020.

The Chicago Federal Reserve's economic activity barometer also signals a continued recovery in the US economy. The Chicago Fed National Activity Index (CFNAI) increased to +1.71 in March, from -1.2 the previous month. A value higher than zero signals economic growth above historical trend levels.



Economic Indicators April 23

MEZ Country Indicator Last
08:00 UK Retail Sales (March, m/m) +2.1%
09:15 FR IHS Markit PMI Composite (April) 50.0
09:30 GE IHS Markit PMI Composite (April) 57.3
10:00 EZ IHS Markit PMI Composite (April) 53.2
10:30 UK IHS Markit PMI Composite (April) 56.4
15:45 US IHS Markit PMI Composite (April) 59.7
16:00 US New Home Sales (March, m/m) -18.2%

Earnings Calender April 23

Country Corporate Period
SZ Schindler Q1 
SZ LafargeHolcim Q1 Sales
GE Daimler Q1
FR Air Liquide Q1 Sales
USA American Express Q1 
USA Schlumberger Q1 


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