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LGT Navigator: Between confidence and skepticism

May 26, 2021

Slightly negative US economic data and the arguments previously put forward by US central bank representatives ensured that inflation concerns initially receded somewhat into the background. However, the issue of inflation and thus also the question of when the central banks will tighten the monetary reins will continue to preoccupy the capital markets, with investor sentiment fluctuating between confidence and skepticism.

Between confidence and skepticism

Worse-than-expected economic and consumer confidence data dampened the inflation and interest rate concerns of investors and supported the US stock indices in early trading, but the gains crumbled by the close and the Dow Jones Industrial ended Tuesday with a daily loss of -0.24% at 34'312.46 points. The S&P 500 also fell -0.21% to 4'188.13 points and the Nasdaq technology exchange also held just at the previous day's level. In Asia, most stock indices held this morning moderately in positive territory and the futures point to a slightly friendly start on Europe's stock exchanges.

Rising prices depress American consumer sentiment

The assessment of consumers regularly surveyed by the Conference Board market research institute showed a gloom in May for the first time this year. Accordingly, the consumer confidence barometer fell by 0.3 points to 117.2 points compared with the previous month. In addition, the previous month's figure was revised surprisingly sharply from an initial 121.7 points to 117.5. According to the institute, rising prices and persistently high unemployment were the main factors weighing on sentiment.

According to the latest data from the US housing market, sales of new homes in April fell by -5.9% compared with the previous month. However, analysts had expected an even sharper decline of -7%. However, on an annual basis, i.e. compared to the first wave of the pandemic, home sales rose by an impressive +48.3%! In addition, monthly data from S&P/Case-Shiller showed a further increase in average home prices in the US. Thus, prices in the 20 largest metropolitan areas increased by +13.3% year-on-year in April (consensus +12.6%), the strongest increase since the end of 2005. Low interest rates, security-driven demand for real estate and the home-office effect drove up prices, the experts commented.

German corporates more optimistic than at any time in the last two years

According to the latest survey results from the Munich-based economic research institute Ifo, the mood in the German economy improved more significantly than expected in May. The highly regarded business climate barometer increased by 2.6 points compared with the previous month to 99.2 points, thus reaching its best value in two years. Economists had expected an average of 98.0 points. The approximately 8'000 companies surveyed gave a better assessment of both the current economic situation and the outlook for the German economy. Ifo President Clemens Fuest summarized: The business climate had improved in all sectors thanks to the less tense corona situation and the progressing vaccination campaign. He added that this could also be observed in sectors that had been severely affected by the corona restrictions, such as trade and services. Overall, the German economy is picking up speed.

EU special summit deals with corona, climate, and geopolitics

At the special summit, which continued yesterday, the heads of state and government of the European Union dealt with the further fight against the pandemic and climate protection. The leaders agreed that the EU wants to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels, but there are still differences of opinion on how to achieve this goal. The EU Commission is now expected to present concrete proposals by mid-July. In the conflict with Belarus, the EU agreed on an extension of sanctions and a ban on flights and landings by airlines from Belarus.

Economic Indicators May 26

MEZ Country Indicator Last period
08:45 FR Economic Sentiment (May) 104.0
08:45 FR Consumer Confidence (May) 94.0
10:00 SZ ZEW Economic Expectations (May) 68.3


Earnings Calender May 26

Country Company Period
UK Marks & Spencer Q1
US Nvidia Q1


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