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LGT Navigator: US Senate passes multi-billion infrastructure package

August 11, 2021

US President Joe Biden has achieved an important success, as the Senate passed the enormous infrastructure package with a bipartisan majority. Further tough negotiations now lie ahead in the House of Representatives. In Germany, economic expectations clouded in August and the risk of a bubble forming on the Swiss real estate market increased. 

Fiscal package

US stock markets climbed again on Tuesday. The adoption of the massive infrastructure package by the US Senate provided a good mood. The S&P 500 advanced +0.1% and closed at 4436.75 points at a new all-time high. The Dow Jones also reached a new all-time high (+0.4%, 35’264.67 points). In contrast, the Nasdaq Composite recorded losses and declined -0.5% to 14’788.09 points. The focus today is the publication of US inflation data for July. Analysts expect that prices have increased by +5.3% year-on-year.

Also in Asia, stock markets record gains on Wednesday. In Tokyo, the Nikkei climbs by +0.5%. In Hong Kong, the Hang Seng rises by +0.1% and the Shanghai Composite also advances by +0.1%.

Important success for Biden

The US Senate passed an enormous infrastructure package on Tuesday, taking a key campaign promise of President Joe Biden an important step forward. In addition to 50 Democrats, 19 Republican senators voted in favor of the bill - only the bipartisan cooperation made a majority in the small chamber even possible. The USD 1 trillion package proposes an extension of spending on existing federal infrastructure programs, plus an additional USD 550bn in the coming years for road and bridge modernization, renewable energy, and numerous other projects. However, the billion-dollar package is not yet a done deal: After this first important success, further tough negotiations in the House of Representatives now lie ahead. 

Sentiment of German financial experts clouds

German stock market professionals are less confident about the future than they were a month ago. Thus, the ZEW index, which measures the mood of financial experts, deteriorated more sharply than expected in August, falling to 40.4 points from 63.3 points in July. Analysts had expected a decline to 55 points. In particular, concerns about a renewed expansion of the corona pandemic are weighing on economic expectations. In May, the index had reached its highest level in more than 21 years at 84.4 points; since then, the sentiment indicator has been falling. In the eurozone, too, economic expectations fell in August for the third time in succession. The corresponding index fell by 18.5 points to 42.7. 

Swiss real estate prices continue to rise

The risk of a bubble forming on the Swiss real estate market is increasing. This is shown by the Swiss Real Estate Bubble Index, which UBS publishes on a quarterly basis. Thus, the prices for homes in the second quarter increased by +5.4% compared to the same quarter last year, the bank announced on Tuesday. This is the strongest increase in eight years. The index has risen accordingly from 1.78 to 1.9 points, with values above 2 reflecting overheating in the real estate market. The mortgage debt of private households has also risen and has increased compared to the previous year by almost +3%. In its report, UBS warns against a further increase in debt. In connection with high price increases, this is an indication that imbalances are developing in the real estate market, the bank stated. In the coming months, however, UBS economists expect the Swiss Real Estate Bubble Index to decline.

 

Economic Indicators August 11

MEZ Country Indicator Last period
08:00 GE Consumer price index (m/m, July) +0.9%
14:30 US Consumer price index, core rate (y/y, July) +4.3%

 

Earnings Calender August 11

Country Company Period
NL Ahold Delhaize Q2
CH Dätwyler Q2
CH Elma Electronic Q2
CH Swiss Steel Q2

 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: David Wolf, +41 44 250 83 48, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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