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LGT Navigator: Investors take cover

December 6, 2018

The Asian stock markets have accelerated their slide today after the arrest of the CFO of the Chinese smartphone manufacturer Huawei in Canada at the behest of the US. This step could contribute to an escalation of the trade conflict. Investors remain cautious at midweek anyway, and given the absence of U.S. stock exchanges due to the funeral of former President Bush, the momentum was lacking.

The ECB's cautious bias toward an interest rate turnaround, despite the announcement to end its billion-dollar bond purchase program probably at the end of this year, weakened the euro significantly. The ECB maintained its key interest rate at a record low and remained extremely cautious in its communication. At the same time, the Bank of Japan also left its key interest rates unchanged and even lowered its inflation expectations.
The capital markets were all relaxed about the thoroughly trend-setting results of the US parliamentary elections, and most stock exchanges recorded some significant gains thanks to the uncertainty that has now been removed. Although US President Donald Trump's position of power has thus been weakened, this should not immediately mean a real change of direction in previous policy, especially with regard to the trade conflict, which is important for the financial markets.

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