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LGT Navigator: Wait and see

August 26, 2021

The capital markets are eagerly awaiting any indications of the Federal Reserve's monetary policy stance. Before Fed Chairman Powell speaks at the virtual Jackson Hole conference on Friday, investors are likely to remain cautious. Caution is also being expressed by various economic indicators that point to a global slowdown in the economic recovery against the backdrop of pandemic uncertainties and supply chain bottlenecks. The latest example is the renewed deterioration in the Ifo business climate barometer.

Wait and see

On Wall Street, however, indices are holding at or near recent record levels despite the tense situation around the monetary policy outlook. The Dow Jones Industrial closed +0.11% higher at 35,405.50 points. The S&P 500 gained +0.22% to 4,496.19 points but traded just above 4,500 points for the first time during the trading day. In contrast, the stock markets in Asia showed a mixed picture this morning, characterized by a lower risk appetite of investors. Meanwhile, the South Korean central bank, as the first central bank in Asia, increased its key interest rate by 25 basis points to 0.75%.

Stagnant US industry orders

Durable goods orders in the US fell -0.1% in July from the previous month, a smaller drop than expected. Orders for civilian capital goods (excluding aircraft), which are considered an important measure of business spending, were flat from the previous month.

Supply bottlenecks and pandemic uncertainties weigh on German companies

In Germany, the 9,000 or so companies surveyed by the Munich-based Ifo economic research institute were once again somewhat more pessimistic in their assessment of the economy. The highly regarded business climate barometer fell more sharply than expected from 100.7 points in July to 99.4 points (consensus 100.3), marking the second decline in succession. The background to this is the continuing supply bottlenecks and concerns regarding the rising Covid-19 infection figures, according to Ifo President Clemens Fuest.

Asia’s diesel surplus probably flowing to Europe

Just as with the first outbreak of the pandemic, large quantities of oil are likely to be transported from Asia to other parts of the world again because of the effects of the coronavirus delta variant. Fuel discounts in Singapore for the price in Europe have recently reached the lowest level since April, this may lead to a considerable amount being transported to Europe to be sold there for a higher price. The price difference is due to the different pandemic situations in Europe and Asia. While mobility is already being reduced again in Asia, it is increasing in Europe, and with-it Europe’s fuel consumption. In August, imports from the Middle East reached a ten-month high and imports from India increased fivefold compared with July. After the summer low, the trucking and industrial sectors will again be increasing diesel consumption from September, meanwhile the reduction in air traffic will allow refineries to continue diverting surplus aviation gasoline to diesel production.


Economic Indicators August 26

MEZ Country Indicator Last period
08:45 FR Economic Sentiment (August) 110.0
13:30 EZ ECB Minutes
14:30 US GDP Q2 (q/q, annualized) +6.6%
14:30 US Initial Jobless Claims (weekly) 348,000
15:00 US Start Jackson Hole central bank symposium


Earnings Calender August 26

Country Company Period
SZ Kudelski H1
SZ Baloise H1
GE Stada H1
FR Bouygues H1
US Dell Q2
US Hewlett-Packard Q3
US Gap Q2
US Abercombie Fitch Q2


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Source: LGT Bank (Switzerland) Ltd.

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