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German business sentiment sours

The business environment in Germany is on a downward trend with the ifo Business Climate Index falling for a third month in a row. Stock markets around the globe were mixed to start the week, while oil stabilised as concerns about escalation in the Middle East subsided. Gold was stable around USD 2500 per ounce and Treasury yields moved little on Monday.

Date
Author
Shane Strowmatt, LGT
Reading time
5 minutes

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The ifo Business Climate Index for Germany declined to 86.6 points in August from 87.0 points in July, indicating worsening sentiment among companies. This decline is driven by a more negative assessment of the current business situation and increasingly pessimistic expectations, with the manufacturing sector experiencing significant drops in satisfaction and order backlogs. While the trade sector saw a slight improvement in expectations, the overall economic outlook remains bleak, particularly for investment goods manufacturers and the service sector. The German economy, Europe’s largest, has struggled to produce growth this year and last, with the economy contracting by 0.1% in the second quarter of 2024.

European equities were mixed on Monday with the Euro Stoxx 50 losing 0.3% and Germany’s DAX closing 0.1% lower.

US stocks trade mostly lower

In the US, positive macroeconomic data couldn’t save markets to start the week. New orders for manufactured durable goods in the United States rose by 9.9% to USD 289.6 billion in July 2024, recovering from a 6.9% decline in June 2024. Nevertheless, US stock markets predominantly experienced declines, with technology stocks being the hardest hit. The Dow Jones Industrial squeezed out a small 0.2% gain, while the S&P 500 lost 0.3% and the tech-heavy Nasdaq-100 dropped more than 1%.

In individual stocks, Tesla (-3.2%) and Nvidia (-2.3%) were among the biggest losers. Nvidia reports second-quarter earnings figures on Wednesday.

Asian stocks follow Wall Street down

In the Asia-Pacific region, stock markets were mostly in the red on Tuesday. Chinese industrial profits, which were up 3.6% on the year in the January to July period, somewhat higher than the 3.5% growth in January to June, were not strong enough to lift the mood. Hong Kong's Hang Seng Index was trading roughly flat, while the CSI 300 was down 0.6% on Tuesday. In Tokyo, the Nikkei 225 gained 0.6% and in South Korea, the Kospi lost 0.3%. Australia’s S&P/ASX 200 was trading 0.2% lower.

Oil stabilises after surge

Oil prices stabilised late Monday after surging due to expectations of US interest rate cuts, escalating conflict between Israel and Hezbollah, and the shutdown of Libyan oil fields, potentially affecting more than 1 million barrels per day. Over the weekend, Hezbollah launched hundreds of rockets and drones at Israel, prompting Israel's military to respond with strikes on Lebanon using approximately 100 jets. Brent was trading slightly higher than USD 80 and West Texas Intermediate was trading around USD 77 per barrel.

Corporate and macroeconomic calendars

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: German gross domestic product, Swedish Producer Price Index, Conference Board Consumer Confidence Index, Richmond Fed Manufacturing Index.

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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