Research Market strategy
By Swissquote Analysts
Published on 30.08.2021
Morning news

Powell Says Fed Could Start Scaling Back Stimulus This Year

Topic of the day

Federal Reserve Chairman Jerome Powell reaffirmed the central bank's emerging plan to begin reversing its easy-money policies later this year while explaining in greater detail why he expects a recent surge in inflation to fade over time. At the Fed's meeting late last month, "I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace" of the Fed's $120 billion in monthly asset purchases this year, Mr. Powell said Friday. Since that meeting, the economy has seen "more progress in the form of a strong employment report for July, but also the further spread of the Delta variant" of the Covid-19 virus, Mr. Powell said Friday morning at a virtual symposium hosted by the Kansas City Fed. Markets rallied Friday, with the S&P 500 hitting a fresh record. The rise of Covid-19 infections due to the Delta variant has complicated the economic outlook by creating renewed risk of a sharper economic slowdown at the very moment some officials were ready to reduce, or taper, the pace of monthly bond purchases.

Swiss stocks

The Swiss stock market went into the weekend with a place in the European midfield. The SMI gained 0.2 per cent to 12,439 points. Among the 20 SMI stocks, there were 12 price gainers and 8 price losers. 20.62 (Thursday: 22.63) million shares were traded. This prospect of further extremely low interest rates made bank shares the day's losers in an otherwise friendly environment. UBS, Credit Suisse and Partners Group fell by up to 0.4 per cent. In the case of Partners Group, a downgrade to "Reduce" from "Add" by Baader Helvea may also have weighed. However, the main reason for this was the good share price performance and not the operating business of the investment manager. Lonza (+1.8%) was at the top of the SMI, more than making up for the previous day's loss. This was triggered by the news that the company had to look for a new CFO.

International markets


European equity indices ended higher on Friday after Federal Reserve Chairman Jerome Powell said on Friday that the central bank intends to start reversing its monetary easing measures later this year, but did not provide a precise timetable for the policy change. The Stoxx Europe 600 index gained 0.4% to 472.3 points. In Paris, the CAC 40 and the SBF 120 gained 0.2% and 0.3% respectively. In Frankfurt, the DAX 30 rose 0.4%, while the FTSE 100 in London gained 0.3%. Axel Springer SE has agreed to buy Washington, D.C., publisher Politico, expanding the German publisher’s portfolio of U.S.-based media holdings. The deal is valued at more than $1 billion, according to people familiar with the matter. Axel Springer will also acquire the remaining 50% share of its current joint venture Politico Europe, as well as tech news site Protocol from Robert Allbritton, founder and publisher of Politico and Protocol, the companies said Thursday. The Wall Street Journal earlier this month reported that Axel Springer was in talks to purchase an ownership stake in Politico, and that the discussions also included the possibility of a full buyout. Pernod Ricard SA said Wednesday that a U.S. decision regarding refund of import taxes will have a positive impact on its profitability this year. “On Aug. 23, 2021, the U.S. Court of Appeals for the Federal Circuit rendered their decision in favor of the National Association of Manufacturers,” the French drinks group said. “As a result, Pernod Ricard can claim drawback upon eligible spirits exported from the [U.S.],” it said. Pernod Ricard therefore expects to book additional pretax profit of $163 million in the U.S. this year, including $33 million of profit from recurring operations, it said. It represents an additional organic growth of roughly 1% this year, the company said.

United States

The S&P 500 and Nasdaq Composite climbed to fresh records Friday after Federal Reserve Chairman Jerome Powell stressed that the central bank shouldn't overreact to a recent spike in inflation. The broad-based S&P 500 advanced 39.37 points, or 0.9%, to 4509.37 after Mr. Powell's highly anticipated speech at the virtual Jackson Hole conference. It was the first time the index closed above 4500. The technology-heavy Nasdaq rose 183.69, or 1.2%, to a record 15129.50. The Dow Jones Industrial Average rose 242.68, or 0.7%, to 35455.80. All three indexes were up for the week Federal Reserve Chairman Jerome Powell reaffirmed the central bank’s emerging plan to begin reversing its easy-money policies later this year while explaining in greater detail why he expects a recent surge in inflation to fade over time. Peloton Interactive Inc. said Friday that the U.S. government has subpoenaed the company for information on its reporting of injuries related to its products. Both the U.S. Department of Homeland Security and the U.S. Department of Justice have issued subpoenas, Peloton said in its annual filing with the Securities and Exchange Commission. Additionally, it said the SEC is investigating the company’s public disclosures over these issues. Walgreens Boots Alliance Inc. recruited a former Walmart Inc. executive to manage the finances of its U.S. business, which generates the bulk of the pharmacy chain’s revenue. Deerfield, Ill.-based WBA, which operates the Walgreens and Boots brands, said Jeff Gruener would take over as chief financial officer of Walgreens, effective Aug. 30.


The stock markets in East Asia and Australia are showing moderate gains at the beginning of the week. In Tokyo, the Nikkei-225 improves by 0.4 per cent, with the firmer yen against the dollar slowing things down somewhat. In Seoul, the Kospi rises by 0.4 per cent. In Shanghai, the Composite Index rises by 0.3 per cent. In Hong Kong, the Hang Seng Index recovers from initial losses and gains 0.4 per cent.


Yields on U.S. government bonds eased back further in Asia, extending Friday's fall after Powell indicated a possible reduction in bond purchases.


UBS lowers J Sainsbury to Neutral (Buy) – Target 300 p
UBS rises CRH target to 4.275 (3.775) p – Buy
IR rises Gea target to 40 (36) EUR – Hold

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