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LGT Navigator: Economic worries and geopolitics have stock markets in their grip

September 30, 2022

On the stock markets, the recovery observed in midweek already petered out again. Subdued economic data from the US and Europe and the now double-digit inflation rate in Germany heightened investors' concerns. Also contributing to the nervousness are the geopolitical tensions regarding Russia's planned annexation of parts of eastern and southern Ukraine and North Korea's recent missile test.  

Economic worries and geopolitics have stock markets in their grip

In New York, the recovery on Wednesday proved to be merely a flash in the pan, and the mix of economic, inflation and interest rate concerns as well as geopolitical tensions again put the stock indices under heavy pressure. The Dow Jones Industrial fell -1.54% to 29'225.61 points and the S&P 500 closed -2.11% lower at 3'640.47 points. The indices on the Nasdaq came under even greater pressure with daily losses of almost -3%. Statements by various representatives of the Federal Reserve, which reaffirmed the need for further interest rate hikes, increased the pressure. Among the individual stocks stood out, for example, Apple with a price slump of around -5% or Tesla shares, which lost almost -7%. In both cases, the background was negative assessments of banks and brokerage houses.

On the bond market, the yield on the benchmark ten-year US government bonds remained at 3.8%, only close to the recent high of just under 4%.

In the Asia-Pacific region, equity markets also came under strong pressure at the end of the week. In Tokyo, the 225-stock Nikkei recorded a minus of -2%. In Hong Kong, the Hang Seng Index remained virtually unchanged, but the Hang Seng Tech Index fell by -1.3%. In Shanghai, the Composite Index fell by about -0.2% and in Shenzhen, the Component Index lost about -0.6%. The MSCI index for the Asia-Pacific region outside Japan lost about -0.3%. In the center were new economic data from China. Purchasing managers surveys pointed to a stronger than expected slowdown in both the service and industrial sectors.

US economy contracted in the first half of the year

According to revised data from the Department of Commerce in Washington, the US gross domestic product declined by -0.6% in the second quarter on an annualized basis. This confirms an earlier estimate. The background to this was primarily lower inventories and business investment, as well as declining public spending. As the US had already contracted by an annualized -1.6% in the first quarter, the world’s biggest economy is in a recession according to the textbook.

Economic sentiment in the eurozone worse than expected

The European Commission's Economic Sentiment Indicator (ESI) fell by 3.6 points to 93.7 in September compared with the previous month. After the fourth decline in a row, the sentiment barometer is now at its lowest level since November 2020. Analysts had expected an average of 95.0. The Energy crisis, inflation and rising interest rates dampen economic sentiment, commented the Brussels executive.

Inflation in Germany in double digits – highest level in around 70 years

Driven by rising energy and food prices, inflation in Germany climbed to +10% in September. A massive jump from the inflation rate of +7.9% reported in August. The last time double-digit inflation was recorded was in the early 1950s. Energy cost around +44% more in September than a year ago and food rose by almost 19% over the year. Compared to the previous month, the cost of living increased by +1.9%.

The German government announced yesterday that it would counter the sharp rise in energy prices with a EUR 200 billion “defense umbrella”.

Economic Indicators September 30

MEZ Country Indicator Last period
08:00 UK GDP Q2 (revision, q/q) -0.1%
08:00 GE Import Prices (August, y/y) +28.9%
08:00 GE Retail Sales (August, m/m) +1.9%
08:45 FR Consumer Prices (September, y/y) +6.6%
09:00 SZ KOF Economic Indicator (September) 86.5
09:00 AUT Consumer Prices (September, y/y) +9.2%
09:55 GE Unemployment Rate (September) 5.5%
11:00 EZ Consumer Prices (September, m/m) +0.6%
11:00 EZ Consumer Prices (September, y/y) +9.1%
11:00 EZ Core Consumer Prices (September, y/y) +5.5%
11:00 EZ Unemployment Rate (August) 6.6%
11:00 IT Consumer Prices (September, y/y) +9.1%
14:30 US Consumer Spending (August, m/m) +0.1%
14:30 US Personal Income (August, m/m) +0.2%
14:30 US PCE Core Price Index (August, y/y) +4.6%
15:45 US Chicago PMI (September) 52.2
16:00 US Consumer Sentiment (September)  59.5


Earnings Calender October 4

Country Company Period
SZ Sika Capital Markets Day
US Hasbro Investor Day


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