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LGT Navigator: Hope for progress in the trade dispute drives stock markets

November 5, 2019

Equity markets made strong gains at the start of the week, driven by hopes of a speedy, at least provisional, settlement in the trade conflict between the US and China, which led to another record hunt on Wall Street. In Europe, too, signs of an easing in the trade dispute between the US and Europe drove indices higher, with European car stocks particularly benefiting.

Trade War

Signs of easing in the US-European trade conflict drove the stock market indices in Europe and caused the EuroStoxx 50 to rise to its highest level since the beginning of 2018. Prior to this, US Secretary of Commerce Wilbur Ross had given hope to the idea that punitive tariffs on car imports from Europe could be avoided. Ross's statements drove car values throughout Europe and the sector index rose by more than +3%.

Sentix survey – investors more optimistic again

According to the latest survey results of the German financial market research company Sentix, the mood among investors has improved again. The economic barometer for November rose by 12.3 points to minus 4.5 points. Analysts, on the other hand, expected only a slight improvement to minus 13.8 points. Above all, the clear improvement in the expectations of the more than 1,000 investors and analysts surveyed is encouraging. The index for assessing the outlook for the euro zone climbed to its highest level in six months. Several factors had contributed to the positive development, such as the renewed easing of monetary policy by the ECB or the expectation of fiscal support from higher government spending.

Continued contraction in Europe's industrial sector

According to the market research institute IHS Markit, the industry sector in the euro zone remained in the deepest crisis in seven years. Although the purchasing managers' index (PMI) for the sector improved slightly from 45.7 to 45.9 points in October, it remains clearly below the growth threshold of 50 points. Markit's chief economist Chris Williamson commented that the weak manufacturing sector is likely to continue to weigh heavily on GDP in the fourth quarter. Today, IHS Markit will also publish its PMI Composite, which summarizes the sentiment in both the industrial and service sectors.

Lagard kicks off her term in Frankfurt

Christine Lagarde took office yesterday as the new President of the European Central Bank (ECB) in Frankfurt. Already on Thursday, the former IMF chief will attend the meeting of euro finance ministers in Brussels. Lagarde, the policy of her predecessor, Mario Draghi, is likely to continue for the time being, but at the same time she will have to try to defuse tensions within the top body of the central bank. Lagarde will then chair its first Governing Council meeting on 12 December and then communicate the monetary policy decision.

Asean summit to sign free trade pact 2020

The meeting of the heads of state and government of the Southeast Asian community of states (Asean) in Thailand ended yesterday with the announcement of a free trade pact, which is to cover about one third of world trade. In addition to China and the ten ASEAN states Indonesia, Malaysia, Thailand, the Philippines, Vietnam, Myanmar, Brunei, Laos, Cambodia and Singapore, Japan, India, South Korea, Australia and New Zealand also want to join the free trade agreement. However, the so-called RCEP (Regional Comprehensive Economic Partnership) treaty is not due to be signed until next year, as India has not yet committed itself to the treaty. Normally, US President Donald Trump would also have visited the Asean Summit, but instead sent only a representative. Trump had cancelled the already fully negotiated agreement for a Transpacific Partnership (TPP) shortly after taking office. In addition, the trade conflict between the US and China drove China and the Asean to create a free trade agreement.

Under Armour shares under pressure

US sportswear manufacturer Under Armour is facing investigations by the US Securities and Exchange Commission and the Department of Justice into the company's accounting practices. Although the third quarter results were positively surprising, the New York Stock Exchange share price plummeted by up to -20%.



Economic Indicators November 5

MEZ Country Indicator Last
02:45 CN Caixin PMI Composite 51.9
10:30 UK Markit PMI Composite 49.3
14:30 US Trade Balance -USD 54.9bn
15:45 US Markit PMI Composite 51.2
16:00 US ISM Non-Manufacturing PMI 52.6

Earnings Calendar November 5

Country Corporate Period
SZ Adecco Q3
SZ Dufry Q3
SZ Oerlikon Q3
GE Hugo Boss Q3
SP Telefonica Q3
US Marriott International Q3



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