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LGT Navigator: Geopolitical tensions weigh

August 3, 2022

Tense relations between the US and China against the backdrop of US House of Representatives Speaker Pelosi's visit to Taiwan are currently weighing on sentiment in the capital markets. In addition, various top representatives of the Federal Reserve indicated that the fight against high inflation is far from over. The yield of ten-year US government bonds subsequently rose sharply to 2.75%.

Geopolitical tensions weigh

In New York, the stock indices continued to weaken against the backdrop of tensions between the US and China. The Dow Jones Industrial closed -1.23% lower at 32,396.17 points and the broad S&P 500 went out at 4,091.19 points -0.67% lower than the previous day. On the Nasdaq, the indices lost about -0.3%. On Asia's stock markets eased in the meantime already again somewhat. In Tokyo, the 225-value Nikkei index traded around +0.4% higher and in Hong Kong, the Hang Seng traded around +0.3% firmer. Taiwan's TSEC 50 index, however, gave today by about -0.4%. The visit to Taiwan by Nancy Pelosi, the number three US official after the president and vice president, is the highest-ranking visit since 1997. Pelosi pledged US support to Taiwan during a joint appearance with President Tsai Ing-wen in Taipei on Wednesday. In response, China launched military maneuvers in nearby maritime areas and summoned the US ambassador. The White House stressed the US did not want a crisis, however President Joe Biden respected Pelosi's decision to visit Taiwan. Her visit, however, did not change the US's “one China” policy.

In addition to geopolitical uncertainties, statements by two top Federal Reserve officials took center stage. Mary Daly, president of the San Francisco Fed, and Charles Evans, head of the Chicago Fed, stressed that the fight against inflation was far from over. As a result, the yield on ten-year Treasury bonds rose as high as 2.75%. For his part, James Bullard of the St. Louis Fed expressed confidence that the US economy can manage a “soft landing” despite the rapid and massive increase in interest rates.

Still in the center of interest remain the quarterly reports of various blue chips. From Europe, we expect today, for example, figures from Hugo Boss, Infineon, or BMW, as well as Axa or Société Générale.

Swiss industry remains on growth track, but momentum is slowing down

The outlook for the Swiss economy clouded over in July, but not as much as in the euro zone. The Purchasing Managers' Index (PMI) for industry as well as for the service sector remained above the growth threshold of 50 points. The industrial PMI slipped from 59.1 to 58.0 points and the services indicator fell for the second month in a row in July, this time by 3.8 to 55.2 points. While the survey data point to declining manufacturing output in the coming months, the situation regarding supply chain issues had eased somewhat.

Swiss consumers becoming more cautious

Consumer confidence in Switzerland continued to deteriorate in the second quarter. According to the State Secretariat for Economic Affairs (Seco), the consumer sentiment index fell from minus 27.4 to minus 41.7 points. This was mainly due to rising prices, while the situation on the labor market continued to be assessed positively. Overall, the private households surveyed expected “economically more difficult times”.


Economic Indicators August 3

MEZ Country Indicator Last period
08:00 GE Exports (June, m/m) -0.5%
08:00 GE Imports (June, m/m) +2.7%
08:30 SZ Consumer Prices (July, y/y) +3.4%
09:15 ES PMI Services (July) 54.0
09:45 IT PMI Composite (July) 51.3
09:50 FR PMI Composite (July) 50.6
09:55 GE PMI Composite (July) 48.0
10:00 EZ PMI Composite (July) 49.4
10:30 UK PMI Composite (July) 52.8
11:00 EZ Producer Prices (July, y/y) +36.3%
11:00 EZ Retail Sales (June, m/m) +0.2%
12:00 OPEC Press Conference
15:45 US PMI Composite (July) 47.5
16:00 US ISM Non-Manufacturing PMI (July) 55.3
16:00 US Industrial Orders (June, m/m) +1.6%


Earnings Calender August 3

Country Company Period
JP Nintendo Q1
GE Infineon Q3
GE Hugo Boss Q2
GE Commerzbank Q2
FR Société Générale Q2
FR Veolia H1
FR Axa H1
NL Just Eat H1
IT Telecom Italia Q2
US Moderna Q2
US Ebay Q2
US Under Armour Q1


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
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Source: LGT Bank (Switzerland) Ltd.


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