Current market commentary
Things got a bit bumpier in global markets over the last few days. Growth concerns and economic disappointments due to the rapid spread of the delta variant, more hawkish tones from the US central bank (tapering discussion) and regulatory tightening in China weighed on investor sentiment. In addition, the monthly option expiration weighed on investor sentiment last week. However, historically high equity fund inflows, increasing share buybacks, corporate takeovers and a strong Q2 reporting season continue to support and investors seem willing to continue buying setbacks. The S&P 500 has not seen a decline of more than 5% since October 2020. The picture is similar for European equities, which have kept pace with their US counterparts since the beginning of the year. We expect them to continue to perform well. The sector structure of European indices has improved, the valuation discount to the US is at an all-time high and earnings revisions have been recently positive especially in Europe.
This week is dominated by the central banks. On 26 August the ECB Monetary Policy Accounts Meeting will take place and on 26-28 August the Fed Economic Forum in Jackson Hole. The market will be watching closely to see what Fed Chairman Powell will say about a possible exit from its bond-buying programme. Today, the Purchasing Managers' Indices (Aug.) for several countries in the eurozone and for the US should give an insight into the growth expectations of the economy. Then it will become clear whether the market's growth concerns are justified. Similarly, the German Ifo Business Climate Index (Aug.) and the US Durable Goods Orders (Jul.) will be released on Wednesday. The French business climate index (Aug.) will follow on Thursday. The following week, inflation data (Aug.), retail sales (Aug.) and labour market data (Aug.) will be released for Germany, as well as the ISM Purchasing Managers Index (Aug.), labour market date (Aug.) and consumer confidence (Aug.) for the US.