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LGT Navigator: Investors rely on central banks

August 22, 2019

Cautious optimism prevailed on the stock markets towards the middle of the week. The Fed's minutes published yesterday evening provided an indication of sentiment among the leaders of the central bank. Investors were positively encouraged by the prospect of a loose central bank policy and the hope for an early settlement of the trade conflict between Washington and Beijing.

The Fed's minutes of the monetary policy meeting held on 31 July reaffirmed expectations in the capital markets that interest rates would be cut further soon, probably by 25 basis points. As the FOMC minutes showed, central bank president Jerome Powell and his council colleagues also discussed the possibility of a stronger interest rate easing against the background of the ongoing trade war with China. The majority of market participants expect two to three further rate cuts by the end of the year. Fed Chairman Powell's appearance at the central bank meeting in Jackson Hole on Friday is now also eagerly awaited. The prospect of further interest rate easing should continue to support the stock markets, although expectations of the central bank are already high and it will be difficult for Powell to really set new impulses.

Negotiation poker in Italy's government crisis

The Italian Social Democrats (PD) are open to negotiations about a possible new government with the five-star movement after the break of the government alliance. Together they would have a wafer-thin majority in parliament. For possible negotiations with the five-star movement, which has been in power until now, PD leader Nicola Zingaretti made it a condition that the new government commits itself to the membership of the European Union and to a change in migration policy. The negotiations with President Sergio Mattarella, which began yesterday, are to be concluded today. Either the formation of a new government will succeed or new elections will actually be held soon - the latter being the declared goal of right-wing populist Lega leader Matteo Salvini who sees this as a good chance of moving into Palazzo Chigi himself. Currently the Lega is the strongest force in polls with up to 39% of the votes. A coalition with Silvio Berlusconi's Forza Italia and the small right-wing party Fratelli d'Italia could actually bring Salvini to power.

Negative interest rates on 30-year Bund

Yesterday, Germany issued a new 30-year Federal bond and registered a worldwide yield of less than zero percent for a term of 30 years for the first time. The average auction yield of EUR 824 million was -0.11%. Against the backdrop of increased fear of recession and the prospect of lower central bank interest rates, investors are prepared to pay for an investment in government bonds that are considered safe.

 

Economic Indicators August 22

51.5

MEZ Country Indicator Last
09:15 FR Markit PMI Composite 51.9
09:30 GE Markit PMI Composite 50.9
10:00 EZ Markit PMI Composite
14:30 US Initial Jobless Claims 220,000
15:45 US Markit PMI Composite 52.6
16:00 EZ Consumer Confidence -6.6
16:00 US Leading Indicator -0.3

Earnings Calendar August 28

Country Corporate Period
SZ Baloise Holding H1

 

 

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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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Impressum
Herausgeber: LGT Bank (Schweiz) AG, Glärnischstrasse 36, CH-8027 Zürich
Redaktion: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Quelle: LGT Bank (Schweiz) AG
Core Personal Consumption Expenditure
MEZCountryIndicatorLast08:00DERetail Sales (y/y)-1.7%08:45FRConsumer Prices EU Harmonized (y/y)1.4%09:00ESGDP (y/y)2.4%09:55DEUnemployment Rate5.0%11:00EUGDP (y/y)1.2%11:00EUCore Consumer Prices (y/y)1.1%11:00EUUnemployment Rate7.5%11:00ITConsumer Prices EU Harmonized (y/y)0.8%12:00ITGDP (q/q)0.12%14:15USADP Employment Report102k20:00USFederal Funds Target Rate2.5%