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LGT Navigator: First steps to a trade deal keeps bullish sentiment alive

November 8, 2019

A potential rapprochement in the trade dispute between the US and China as well as predominantly positive corporate news continued to create a good mood on the stock markets. In the wake of the recent record hunt on Wall Street, the European stock market benchmark EuroStoxx 50 climbed to its highest level for two years yesterday. Meanwhile, the Bank of England indicated a loosening of interest rates against the backdrop of the Brexit.

Trade War

According to statements by the Chinese and US governments, the US and China have agreed to gradually reduce each other's punitive tariffs as part of a partial agreement. Beijing also announced that an agreement is to be signed within the next few weeks. In the trade dispute between the US and Europe, outgoing EU Commission President Jean-Claude Juncker is convinced that the US government will not impose new tariffs on European car imports. Washington wants to decide on 14 November whether the duties on imports of cars and car parts from the EU will be increased.

China's foreign trade balance dominated by trade war

Against the backdrop of the ongoing trade conflict with the US, China's exports declined again, but to a much lesser extent than expected. Exports fell by -0.9% year-on-year, compared with a market consensus of -3.9% and a decline of -3.2% in the previous month. Imports fell by -6.4% (consensus -7.8%, previous month -8.3%). What stands out is that China's exports to the USA fell by -16.2% and imports by -14.3% in October.

Bank of England signals monetary easing potential

Britain's central bank is increasingly concerned about the risks of the imminent Brexit. As expected, Governor Mark Carney left the key interest rate unchanged at +0.75%, but announced a rate cut in the near future. Already yesterday, two members of the monetary policy council of the central bank voted for an immediate easing. The BoE also lowered its growth and inflation forecasts. In doing so, the British central bank would follow the lead of the Fed and the European Central Bank (ECB), which, as we know, have already loosened their monetary policy. Following the Bank of England's interest rate decision, the British pound came under pressure. New elections are now eagerly awaited in Great Britain on 12 December. After the postponement last negotiated with Brussels, the UK is now to leave the EU "properly" by the end of January 2020.

Walt Disney beats profit expectations

Walt Disney's Q4 figures exceeded market expectations in terms of profit, but sales remained slightly below consensus. Net income for the entertainment group in the final quarter was USD 1.05bn, or USD 1.07 per share, compared with an analyst consensus of 95 cents. Sales for the year increased by +34% to USD 19.1bn (consensus USD 19.2bn). As a result, the share price rose by almost +5% after the close of trading.

ECB and EU Commission expect euro zone weakness to persist

The European Central Bank (ECB) expects the euro zone economy to remain weak due to weak world trade and prolonged uncertainty. According to the central bank's monthly report published yesterday, current data and survey results indicate only moderate growth in the second half of the year. While the favorable financing conditions continue to be positive, companies are investing less due to uncertainties and lower profit margins. Against this backdrop, a comprehensive monetary policy by the central bank to support the economy is still necessary. The EU Commission comes to a similar conclusion. According to a Brussels executive, Europe's economy is going through a period of weakness. As a result, the Commission corrected its growth forecast for the current year and now expects slightly lower GDP growth of +1.1% instead of +1.2%. A growth rate of +1.2% (previously +1.4%) is now forecast for 2020. The EU Commission expects the strongest growth in the euro zone in Ireland in the current year with a proud +5.6%. The weakest growth is expected in Italy with +0.1%.



Economic Indicators November 8

MEZ Country Indicator Last
08:00 GE Exports (m/m) -1.5%
08:00 GE Imports (m/m) +0.6%
08:45 FR Industrial Production (y/y) -1.4%
16:00 US Uni Michigan Consumer Confidence 95.5

Earnings Calendar November 8

Country Corporate Period
SZ Richemont H1
GE Allianz Q3
US Duke Energy Q3



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Source: LGT Bank (Switzerland) Ltd.

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