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LGT Navigator: The fear of an “endless crisis mode“

September 24, 2020

After the recent losses, the stock markets initially began to stabilize, but this quickly gave way to a risk-averse attitude on the part of investors in view of the fear of a significant increase in the number of corona cases and renewed lockdowns. Meanwhile, statements from the US Federal Reserve confirmed the highly uncertain economic outlook and the prospect of ultra-low key interest rates in the long term. Furthermore, US President Trump did not want to commit himself to guarantee a smooth handover if he lost the election.

The fear of an “endless crisis mode“

Prices on the New York Stock Exchange fell across a broad front, led by technology and energy stocks. The Dow Jones Industrial closed -1.92% lower at 26 763.13 points and the broad-based S&P 500 fell a good -2% to 3 236.92 points. The technology-heavy Nasdaq 100 index even fell by more than -3%, closing at 10 833.33 points. Only briefly, the announcement of the American pharmaceutical company Johnson & Johnson, which started with a large-scale test for a vaccine against Covid-19, provided positive momentum. This makes J&J the fourth pharmaceutical company to bring its candidate into the final decisive test phase in the US. The special feature of the product is that only one dose should provide sufficient protection. In Asia, most stock market indices followed the negative patterns of Wall Street.

Fed calls for more fiscal stimulus

At his hearing before the US Congress, Fed Chairman Jerome Powell called for a rather gloomy economic outlook and more fiscal stimulus. Richard Clarida, deputy chairman of the US Federal Reserve Powell, said in an interview with Bloomberg that the Fed “will not think about raising interest rates until the inflation rate has reached the two percent mark“. According to the new strategy, the Fed can also keep its key interest rate constant beyond that point. Today, Fed Governor Powell and US Treasury Secretary Steven Mnuchin will address the Senate Banking Committee.

SNB monetary policy assessment in focus

Today at 09:30 (CET) the monetary policy decision of the Swiss National Bank (SNB) is expected. An immediate adjustment is not expected, but investors will be eager to hear the assessment of SNB Chairman Thomas Jordan regarding the further economic and currency development against the background of a rising number of Covid-19 infections in Switzerland.

Differing recovery dynamics in the eurozone

The latest purchasing survey data from IHS Markit point to an uneven recovery path in the eurozone. While the environment in industry appears to have continued to improve in September, the mood in the service sector clouded over in view of the pandemic, which is spreading more strongly again, with impending lockdowns. The purchasing managers' index (PMI) for the industrial sector rose sharply from 51.7 to 53.7 points. By contrast, the PMI for the service sector weakened surprisingly sharply from 50.5 points in August to 47.6 points. The composite PMI indicator for the private sector as a whole dropped from 51.9 to 50.1 points. The recovery is also taking different courses in the various euro countries. In Germany and France, the situation in industry improved in September, in some cases significantly, while the service sector contracted. In summary, it can be said that the recovery in the euro zone came to a standstill in September due to the rising corona infection figures, commented IHS Markit Chief Economist Chris Williamson.

Record slump of Spain's economy confirmed in Q2

The Spanish economy, in the midst of a strict lockdown in the second quarter due to the pandemic, fell by -17.8% quarter-on-quarter according to revised figures. Although the slump was less severe than originally assumed at -18.5%, it remains the sharpest fall in gross domestic product ever measured. In its current forecast for the year as a whole, the Spanish central bank expects the economy to contract by 10.5-12.6%. Next year, Spanish GDP is then expected to grow again by +4.1-7.3%.

Sentiment in UK economy clouds over again

In the UK, the business environment for entrepreneurs has again deteriorated significantly according to the latest survey results. The purchasing managers' index for the private sector ­industry and services ­ fell more sharply than expected in September to 55.7 points from 59.1 points in the previous month. The indicator signals that the economic recovery from the corona shock is faltering on the island. Rising corona infection figures and the threat of another lockdown are causing uncertainty.

Cautious confidence before new Brexit negotiations

EU negotiator Michel Barnier was confident at the start of renewed Brexit talks. The EU was determined to find an agreement. By the end of the year, Brussels and London must agree on a trade agreement that will govern future relations after the United Kingdom leaves the EU. Otherwise there would still be a hard Brexit with potentially serious consequences, especially for the British economy. However, uncertainty now hangs over the ongoing negotiations as to the adaptation of the previous agreement with the EU brought into Parliament by Prime Minister Boris Johnson. The law would enable the British to override the rule laid down in the Brexit Treaty, which stipulates that EU customs rules would continue to apply in Northern Ireland. The government's proposal must be approved by the British House of Lords next week, but Johnson does not have a majority there. The EU has warned the Johnson government of a breach of contract.


Economic Indicators September 24

MEZ Country Indicator Last
09:00 SP GDP Q2 (q/q) -18.5%
09:15 FR IHS Markit PMI Composite (September) 51.6
09:30 GE IHS Markit PMI Composite (September) 54.4
09:30 SZ SNB Monetary Policy Announcement
10:00 EZ IHS Markit PMI Composite (September) 51.9
10:30 UK IHS Markit PMI Composite (September) 59.1
15:00 US FHFA Housing Prices Index (July, m/m) +0.9%
15:45 US IHS Markit PMI Composite (September) 54.6

Earnings Calendar October 6

Country Corporate Period
SZ Aryzta J


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail:
Source: LGT Bank (Switzerland) Ltd.

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