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LGT Navigator: Brexit chaos – British Parliament votes for renewed postponement

September 5, 2019

Britain's Prime Minister Boris Johnson had to accept another severe defeat in parliament yesterday. Parliament voted with 327 votes to 299 to postpone the Brexit vote until next year.

Britain's Prime Minister Boris Johnson had to accept another severe defeat in parliament yesterday. Parliament voted with 327 votes to 299 to postpone the Brexit vote until next year. The law is intended to oblige Prime Minister Johnson to postpone the Brexit until January 31, 2020 if it is not possible to negotiate a new phase-out agreement with the EU beforehand. In addition, Johnson failed with his proposed wish for early elections on October 15, for which he would have needed a two-thirds majority. Johnson nevertheless confirmed that if he remained head of government, Britain would leave the EU by October 31 this year at the latest. Meanwhile, the latest Purchasing Managers Surveys signal a dramatic slowdown in the British economy and an increased risk of recession. After industry had already experienced a downturn, the British service sector also lost momentum in August. The PMI of IHS Markit fell by -0.8 points to 50.6 points, the lowest level for more than three years. The lack of significant growth in the services sector increases the likelihood that the British economy will slide into recession, Markit chief economist Chris Williamson commented.

Fed Beige Book – moderate pace of growth in US economy

The US Federal Reserve's regular economic report from the twelve districts attested the US economy a "moderate pace of growth" in the period from mid-July to early August. Despite the continuing uncertainty in the trade war with China, most companies remained optimistic about the near future, the Fed commented. Nevertheless, industrial production declined. The so-called Beige Book serves the Monetary Policy Committee (FOMC) two weeks later as a decision-making basis for setting key interest rates. The Fed is eagerly awaiting its next interest rate decision on September 18. Meanwhile, as most economists expect, Canada's central bank left the key interest rate unchanged at +1.75%.

Services sector supports euro zone economy

In contrast to the downturn in the industrial sector, the mood in the services sector in the euro zone brightened slightly in August. The corresponding Purchasing Managers' Index (PMI) improved from 53.2 to 53.5 points, thus remaining clearly in the growth range. This results in a PMI composite of 51.9 points for the entire private sector in the euro zone. According to the research firm IHS Markit, which is responsible for the survey, the discrepancy between the industrial and service sectors can be attributed to the ongoing US-Chinese trade conflict. According to Markit chief economist Chris Williamson, economic growth in the euro zone remains shaky. In the third quarter, economic growth of only +0.2% is expected in the euro zone, with "hard" economic data pointing to even lower growth, Williamson said.

Lagarde wants to keep ECB on Draghis course

The designated head of the ECB, Christine Lagarde, has spoken out in favor of a continuation of the loose monetary policy. "I agree with the Governing Council's view that a highly cyclically supportive monetary policy is justified for an extended period of time, as the euro zone economy faces some risks in the short term," the former head of the International Monetary Fund (IMF) told the Economic and Monetary Affairs Committee of the European Parliament. Lagarde is to replace Mario Draghi in November, whose term of office expires at the end of October after eight years.

Swiss economic growth weakens

The Swiss gross domestic product expanded only slightly in the second quarter by +0.3% compared to the previous quarter. In addition, the growth rate in the previous quarter was revised down from the originally calculated +0.6% to +0.4%. According to the State Secretariat for Economic Affairs (Seco), industry, unlike other European countries, made a significant contribution to economic growth in Q2. On the other hand, investments in plant and equipment fell by -1.0%. According to Seco, companies invested less in machinery due to the uncertain environment.

Economic Indicators September 5

MEZ Country Indicator Last
07:45 SZ GDP (q/q) +0.6%
08:00 GE Factory Orders (y/y) -3.6%
14:15 US ADP Employment Report 155,600
14:30 US Non-Farm Productivity Q2 (q/q) +2.3%
15:45 US Markit PMI Composite 50.9
16:00 US ISM Non-Manufacturing PMI 53.7
16:00 US Factory Orders (m/m) +0.6%

Earnings Calendar September 5

Country Corporate Period
US Kroger Q2



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Source: LGT Bank (Switzerland) Ltd.

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Herausgeber: LGT Bank (Schweiz) AG, Glärnischstrasse 36, CH-8027 Zürich
Redaktion: Alessandro Fezzi, +41 44 250 78 59, E-Mail:
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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%