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LGT Navigator: Delta variant rattles solid stock market sentiment

June 29, 2021

While economic optimism currently seems to outweigh investors' inflation concerns, fears of rising corona infection figures are now increasingly creeping back in. Despite progress in the vaccination campaign, the delta variant is causing concern worldwide. Nevertheless, the prospect of continued expansionary monetary policy in the medium-term and further support from the US infrastructure package are ensuring that the underlying mood on the stock markets remains positive. The dividend increases of the major American banks are also likely to be received positively.

Delta variant rattles solid stock market sentiment

Apart from the Dow Jones Industrial, the US stock indices continued their record run on Monday. The broad S&P 500 closed +0.23% higher at 4'290.61 points and on the Nasdaq, the indices even gained a good +1% and reached new record highs: the Nasdaq 100 went out at the start of the week with a gain of +1.25% at 14'524.98 points. The Dow, on the other hand, declined -0.44% to 34'283.27 points. In Asia, pandemic concerns dampened investor sentiment against the backdrop of the delta variant spreading around the world, and most stock indices quoted slight losses. In Tokyo, the 225-stock Nikkei index posted a loss of just under -1%.

Leading Wall Street banks want to increase dividends

The largest US banks want to increase distributions to shareholders after passing stress tests. JPMorgan announced plans to raise its third-quarter dividend to one US dollar from 90 cents, and Morgan Stanley plans to double its quarterly dividend to 70 cents. Bank of America also plans to increase its dividend by 17% and Goldman Sachs now plans to pay a USD 2 dividend per share instead of USD 1.25. Last week, the Federal Reserve lifted its restrictions on share buybacks and dividends, saying this was no longer deemed necessary given the banks' robust financial position.

Bundesbank head Weidmann warns against exaggerated inflation concerns

Jens Weidmann, President of Germany's Bundesbank, acknowledges the risk of inflation rising with the economic recovery, but warns against exaggerated inflation fears. Temporarily, consumer price inflation in Germany could rise to around 4%, according to Bundesbank estimates, mainly due to higher energy prices. Most recently, the inflation rate in May reached +2.5%, the highest level in almost ten years. Catch-up effects following an easing of the corona restrictions should ensure stronger consumer demand, but only temporarily. According to Weidmann, second-round effects such as significantly stronger wage growth or noticeably higher inflation expectations would be decisive for an effectively sustainable higher inflation rate. However, there are no signs of this at present, said the head of the Bundesbank. In the longer term, the Bundesbank expects inflation to remain around 2%.

Russia's central bank holds out the prospect of further rate hikes

Russian central bank intends to fight rising inflation with further interest rate hikes. The head of the central bank, Elvira Nabiullina, referred to the significant acceleration in inflation – the current rate is a good 6% – which will probably make further interest rate tightening necessary in the coming months. In the current year, Russia's central bank has already raised its key interest rate several times to get a grip on the rise in the cost of living and the weak domestic currency. Currently, the key interest rate stands at 5.5%.

G20 discusses pandemic response and climate protection

In preparation for the major G20 summit in Rome at the end of October, the foreign ministers of the G20 countries are meeting today to discuss in particular how to proceed in the fight against pandemics and climate protection. The aim is to achieve closer global cooperation, improved preparation for future pandemics and a rapid revival of the global economy.

Economic Indicators June 29

MEZ Country Indicator Last period
01:50 JP Retail sales (y/y, May) +11.9%
08:45 FR Consumer Confidence (June) 94.0
09:00 SP Consumer Prices (June, y/y) +2.4%
11:00 EZ Economic Sentiment (June) 114.5
14:00 DE Consumer Prices (June, y/y) +2.4%
15:00 US S&P/Case-Shiller home price index (y/y, April) +13.3%
16:00 US Consumer Confidence (June) 117.2

 

Earnings Calender June 30

Country Company Period
US Micron Technology Q3

 

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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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