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LGT Navigator: SNB sticks to its course without much room for maneuver

March 26, 2021

As expected, the Swiss National Bank (SNB) reaffirmed its monetary policy stance. In view of the continuing high level of uncertainty in the economic outlook and the constant threat of an undesirable appreciation of the Swiss franc, the SNB still has little room for maneuver. On Wall Street, the indices trended inconsistently. On the one hand, the faster-than-expected vaccination campaign in the US promised by President Biden provided economic optimism and stronger demand for cyclical stocks and bank stocks. On the other hand, technology stocks remained under pressure.

SNB sticks to its course without much room for maneuver

US stock markets closed Thursday without a consistent trend after volatile trading. The Dow Jones Industrial exited with a daily gain of +0.62% at 32'619.48 points, while the market-wide S&P 500 gained +0.52% to 3'909.52 points. US banks extended gains in after-hours trading after the Fed signaled an end to pandemic-era dividend restrictions. On the Nasdaq, however, technology stocks remained under selling pressure and the Nasdaq 100 closed -0.14% lower at 12'780.51 points. In the bond market, the yield on ten-year US government bonds rose slightly to around 1.63% after a lackluster auction of seven-year bonds.

In Asia, most stock indices recorded gains this morning and European stock futures also indicate a positive start to Friday trading. Today’s focus will be on the regular business survey of the Munich-based Ifo Institute on corporate sentiment in Germany.

SNB stays on course

The Swiss National Bank is sticking to its monetary policy stance and thus also to the negative interest rates. The key interest rate remains at -0.75% and the SNB continues to emphasize that the Swiss franc is valued too high. The central bank will therefore remain active on the foreign exchange market to prevent an appreciation of the franc. In its economic outlook, the SNB assumes a significant recovery of the Swiss economy in the current year and forecasts GDP growth of 2.5-3.0%. In its current inflation forecast, the central bank anticipates somewhat stronger inflationary pressure. Accordingly, the inflation rate will average +0.2% this year (previously 0.0%). In 2022 and 2023, inflation rates of +0.4% (previously +0.2%) and +0.5% are now expected due to anticipated higher oil prices and a weaker Swiss franc.

Fed eases dividend moratorium for US banks

The Federal Reserve will again allow most US commercial banks to pay dividends and buy back their own shares as of July. This should benefit all banks that successfully pass the upcoming stress test to check capital buffers, the Fed commented.

US economy sends some positive signs

The US economy grew slightly faster in the final quarter of 2020 than had been assumed in an initial estimate. According to revised Commerce Department data, gross domestic product expanded at an annualized rate of +4.3%. The previous assumption had been +4.1%. The relatively moderate year-end growth followed a stellar recovery in the third quarter with an annualized rate of +33.4% after the historic economic slump in the second quarter and the subsequent easing of pandemic measures. An equally positive and more topical sign was provided by the weekly labor market data. Last week, for example, initial claims for unemployment insurance fell by 97'000 from the previous week to 684'000. The decline was thus much stronger than analysts had expected (consensus 730'000). Currently, about 3.9 million people in the US are claiming unemployment benefits.

ECB to provide guidance on “green bonds”

According to central bank chief Christine Lagarde, the European Central Bank (ECB) could provide guidance to the market on “green bonds.” As one of the largest buyers of “green bonds,” the ECB is closely monitoring how its actions could affect market developments. Standardization could help emerging markets gain liquidity and encourage growth, he said. In this context, the ECB's eligibility criteria could provide useful guidance, Lagarde said.


Economic Indicators March 26

MEZ Country Indicator Last
08:00 UK Retail Sales (February, m/m) -5.7%
08:00 SP GDP Q4 (q/q, revision) +16.4% (Q3)
10:00 GE Ifo Business Climate (March) 92.4
10:00 IT Business Climate (March) 99.0
10:00 IT Consumer Sentiment (March) 101.4
13:30 US Personal Consumption (February, m/m) +2.4%
13:30 US Personal Income (February, m/m) +10.0%
13:30 US Core PCE (Inflation) Index (February, y/y) +1.5%
15:00 US Consumer Confidence University Michigan (March) 83.0

Earnings Calendr March 26

Country Corporate Period
GE BASF Capital Markets Day


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