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LGT Navigator: Corona fear catches up with stock markets again

September 22, 2020

The fear of a new corona wave, especially in Europe, increased nervousness on capital markets at the beginning of the week. In the US, the election campaign is overshadowed by the dispute over the successor to the late constitutional judge Ginsburg. US President Trump now wants to announce his candidate for the Supreme Court already this week. Against this background, the political leaders in Washington remain divided and a compromise for a further corona aid package seems to be a long way off. US Fed Chairman Powell will emphasize again today that the central bank will use all its instruments to support the economy.

Corona fear catches up with stock markets again

On Wall Street and on Europe's stock exchanges, investors' fear of a second wave of pandemics is causing noticeably greater nervousness. As a result, share prices initially plummeted at the beginning of the week, but then rebounded again in the course of the trading day thanks to a recovery in technology stocks. The Dow Jones Industrial initially fell to its lowest level since the beginning of August and then closed with a daily loss of -1.84% at 27 147.70 points. The market-wide S&P 500 lost -1.16% and closed the day at 3 281.06 points. The technology-driven Nasdaq 100 turned positive after initial losses and closed +0.4% higher at 10 980.22 points. In Asia, the generally risk-averse attitude of investors continued and concerns about the course of the coronavirus pandemic dominated. While the stock exchange in Tokyo remained closed for the holiday season, the stock indices in Hong Kong, Shanghai and Shenzhen were slightly down.

US Federal Reserve Chairman Jerome Powell will appear before the House of Representatives' Finance Committee today to reaffirm the Fed's willingness to do everything in its power to guide the economy through the corona crisis. The Federal Reserve is obliged to use the full range of its instruments, according to a previously published manuscript.

ECB Lagarde stresses concern over euro appreciation

The President of the European Central Bank (ECB) Christine Lagarde confirmed that the ECB will continue to follow the course of the euro exchange rate closely. The current environment is characterized by a high degree of uncertainty and the development must therefore be examined very carefully. This applies in particular to exchange rate developments with regard to their consequences for the medium-term inflation outlook, said Lagarde.

ECB reviews its corona aid package

According to a Financial Times report, the European Central Bank (ECB) is currently reviewing its EUR 1.35 trillion Corona Securities Purchase Program (PEPP). The impact of the stimulus on the euro economy and the potential duration of the program are being examined, as is the possibility of extending the more flexible rules applicable to this package to other ECB programs. The central bank had established PEPP in March at the height of the pandemic-related lockdowns in Europe to contain the economic consequences of the corona crisis.

Bundesbank expects further recovery, but with less momentum

In its monthly report published yesterday, the German Bundesbank is somewhat more confident about the recovery from the corona shock. According to the central bank, the German economy had managed to turn the corner in the summer following the deep slump resulting from the lockdown. A strong countermovement is expected in the third quarter of 2020, although it will still fall considerably short of the pre-crisis level - this applies to both industry and the service sector. In conclusion, the Bundesbank expects the recovery to continue over the rest of the year, but to lose momentum.

Norway's sovereign wealth fund to invest more in North America and less in Europe

The billion-euro Norwegian government pension fund (Government Pension Fund Global), on the recommendation of the Norwegian Central Bank, which manages the fund, and the Ministry of Finance, is to increase the share of North American assets in the future, less in Europe and more in North America. The adjustment will ensure that the investments better represent the distribution of value added in listed companies worldwide, said Norway's Finance Minister Jan Tore Sanner. The fund currently has a volume of approximately NOK 10.48 trillion (USD 1.15 trillion) and is invested in just over 2.6% of all listed European equities and 1.1% in equities from North America, Africa and the Middle East.

UK industry buries hope of “V-shaped“ recovery

In a recent survey by the British industry association “Make UK“, the majority of the companies surveyed no longer expect a rapid recovery and a return to pre-crisis levels. A long way back to normal trading conditions must be expected and the scenario of a “V-shaped“ economic recovery is “nothing more than fantasy“. In addition to the corona crisis, the risk of a failure of the negotiations between the UK and the European Union on a trade agreement after the end of the Brexit transition period adds to the uncertainty.



Economic Indicators September 22

MEZ Country Indicator Last
16:00 US Existing Home Sales (August, m/m) +24.7%
16:00 US Existing Home Sales (August, y/y) +5.9%

Earnings Calendar September 24

Country Corporate Period
US Nike Q1


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