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LGT Navigator: Stock markets remain depressed

May 9, 2022

At the end of last week, equity markets were unable to recover from the previous day's slump and continued their downward slide for the most part. While the Federal Reserve's monetary policy decision was initially received positively, investors were extremely nervous after the short-lived rally and stock market sentiment remains depressed. On Friday, moreover, robust employment growth in the United States and continued upward pressure on wages reinforced the prospect of an increasingly restrictive stance by the Federal Reserve.

Stock markets remain depressed

On the New York Stock Exchange, indices failed to recover from the previous slump on Friday and closed in negative territory once again. Continued solid job growth in the US reinforced the prospect of further strong and rapidly rising interest rates and fears of an economic slump. The Dow Jones Industrial lost at times around -1.5% and then went into the weekend at 32'899.37 points (-0.3%). The S&P 500 gave up -0.57% to 4'123.34 points. The losses were again strongest on the technology exchange Nasdaq, where the indices were around -1.2% lower than the previous day. In the bond market, meanwhile, the yield of ten-year US government bonds settled above three percent and climbed to 3.13%. In Asia, the stock indices tend to be mostly negative at the start of the week. In Tokyo, the Nikkei 225 index trades around -2.4% lower, while in Hong Kong the stock exchange remained closed due to a public holiday. 

US labor market remains robust

In the United States, 428'000 new jobs were created in the overall economy in April. Job growth was broad-based, the report said. This clearly exceeded market expectations of 380'000 non-farm payrolls and somewhat eased investors' concerns about the economy. At the same time, the unemployment rate stagnated at a low level of 3.6%. Meanwhile, wages continue to rise. In April, salaries increased by +0.3% on average compared with the previous month and by +5.5% over the year. Overall, the US central bank is likely to see its current monetary policy stance confirmed.

Bundesbank chief calls for interest rate turnaround over time

Bundesbank President Joachim Nagel is optimistic that the ECB will get a grip on the high inflation in the euro zone. In an interview with the Frankfurter Allgemeine Zeitung, Germany's top central banker said that while the ECB cannot control certain factors with its monetary policy, it can influence inflation expectations. “However, we must not wait too long,” Nagel stressed. In the run-up, some top ECB officials had hinted at a possible interest rate turnaround as early as July.

No agreement yet on EU oil embargo against Russia

After days of negotiations, the European Union has still not been able to agree on an oil embargo against Russia. The main point of contention remains exemptions for countries such as Hungary, the Czech Republic, Slovakia, and Bulgaria, which are heavily dependent on Russian oil. These EU countries are insisting on guarantees for supply security, Brussels said. For the sanctions package against Russia to be implemented, it requires the approval of all EU countries.

Economic Indicators May 9

MEZ Country Indicator Last period
10:30 EZ Sentix Investor Economic Outlook -18.0


Earnings Calender May 9

Country Company Period
GE Infineon Q2
FR BioNTech Q1
NL PostNL Q1 


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Source: LGT Bank (Switzerland) Ltd.

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