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LGT Navigator: A mixed start to the earnings season

January 17, 2022

Although the first quarterly results of the two major US banks JPMorgan and Citigroup exceeded market expectations, they did not provide any real positive impetus for general stock market sentiment. On the other side of the world, the threat of escalation of the Ukraine conflict is also causing increasing nervousness. In the United States, the financial markets will remain closed today due to a holiday in honor of Martin Luther King Jr.  Meanwhile, China’scentral bank is trying to accelerate the pace of economic activity again by lowering the key interest rate.

A mixed start to the earnings season

At the end of last week, technology stocks, which had previously come under pressure due to the adjustment to a forced pace of monetary policy normalization of the Federal Reserve, were able to recover further. On the Nasdaq, the indices gained around three-quarters of a percent on Friday. The Dow Jones Industrial, however, suffered from disappointing economic data and the nothing fully convincing quarterly results of large US banks. The Dow closed about half a percent lower before the long weekend. For the week, the Dow was down just under one percent. For its part, the S&P 500 remained virtually unchanged from the previous day.

JPMorgan Chase and Citigroup posted profit declines in the final quarter of 2021. While the banks still exceeded consensus expectations significantly in some cases , the quarterly statements failed to convince the market and the shares fell on Friday. JPMorgan reported net quarterly earnings per share of USD 3.33 (consensus USD 3.01) and Citi EPS of USD 1.46 (consensus USD 1.43).

China's central bank gives economy a helping hand and eases key interest rate

Amid weak economic growth in the final quarter of 2021, China's central bank today cut its key interest rate for the first time in nearly two years. Earlier, the Beijing statistics bureau reported that China's economy grew by “only” +4% in the final quarter of 2021. Viewed over the year, the world's second-largest economy achieved a growth rate of +8.1%. However, the strong increase over the year can mainly be explained by the low basis for comparison due to the first pandemic year 2020.

Clouded consumer sentiment in the US and weak year-end in the retail sector

US retailers posted a sharper-than-expected decline in sales in December. Compared to the previous month, retail sales slumped -1.9% at the end of last year, while analysts had forecast only a minimal decline of +0.1%.

Consumer sentiment also clouded at the beginning of the year. According to the University of Michigan the consumer confidence barometer in January fell to its lowest level in over ten years.

Unbroken inflation trend in the eurozone

In France, consumer price inflation was confirmed at +3.4% in December. The main driver continues to be energy prices, which rose by +18.5% year-on-year at the end of 2021. However, this means that inflation in the second-largest economy in the euro area has not risen further, at least for the first time since August. Moreover, France's inflation rate is significantly lower than that of Germany, for example, at +5.7%. Meanwhile, the inflation rate in Spain climbed to +6.6% in December – a massive jump from +5.5% in November - and thus reached its highest level in almost 30 years.

ECB chief Lagarde reaffirms her inflation outlook

Christine Lagarde, President of the European Central Bank (ECB), continues to expect inflation in the eurozone to moderate again later this year. At the end of 2021, the inflation rate in the euro zone reached a record high of +5.0%. The known inflation drivers will ease this year, Lagarde expressed her conviction, stressing that the ECB has flexibility to respond to different circumstances.

Economic Indicators January 17

MEZ Country Indicator Last period
00:00 USA Holiday (Martin Luther King Jr. Day)
10:00 IT Consumer Prices (December, y/y) +4.1%


Earnings Calender January 17

Country Company Period
ESP Repsol  Q4 Sales
UK Rio Tinto Q4 Sales


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