Insights et vue du marché
Sentiment among German businesses improved for the fifth month in a row, according to a survey of roughly 9000 business leaders in Europe’s largest economy conducted by the Ifo Institute. The Ifo Business Climate Index rose to 93.3 points from 91.1 points in February. The improvement comes after the German economy shrank in the last quarter of 2022 as consumers pulled back due to inflation fears.
The manufacturing component of the Ifo Business Climate Index rose considerably with sentiment improving in key German markets such as at automotive, chemicals and electronic companies. The improved mood comes after a year of high energy prices had put businesses in the manufacturing-heavy economy under pressure. While the prospects for the economy are brightening, the nation of over 80 million people was crippled by the largest strike since the early 90s with airports suspending flights and train services standing still on Monday.
In addition to the better sentiment in traditional manufacturing sectors, Germany remains in focus after the recent turmoil in the financial sector spilled over to Deutsche Bank at the end of last week. After falling 8.5% Friday, Germany’s largest lender rebounded by more than 6% on Monday. The banking sector as a whole experienced a moment of calm on Monday after US regulators said they would backstop a deal for banking group First Citizens BancShares to acquire Silicon Valley Bank, which was one of the largest bank failures in recent history. As a result, the US benchmark KBW Bank Index ended Monday up 2.54%.
In New York, broader stock indices also profited from the bounce in bank stocks on Monday. The Dow Jones Industrial gained 0.6% to end the day at 32’432.08 points. The S&P 500 increased 0.16% to finish at 3’977.53 points. On the Nasdaq, the major tech indices lost around 0.7%.
Markets in Asia also used the moment of calm in the financial sector to book gains. Hong Kong’s Hang Seng Index increased 0.4% and the Hang Seng Tech Index gained 0.35%. Australia’s S&P/ASX 200 rose 1.1% and Japan’s Nikkei made marginal gains. In mainland China, the Shanghai Composite was down slightly while the Shenzhen Component fell 0.33%.
Corporate news in focus: Sika AG annual general meeting.
Economic data in focus: Bank of Japan Governor Haruhiko Kuroda speaks at a fintech conference in Tokyo (06:00 CET), Bank of England Governor Andrew Bailey speaks at a committee hearing on Silicon Valley Bank (10:45 CET) and European Central Bank President Christine Lagarde speaks at a central banking innovation conference in Frankfurt (15:15 CET).
All about global economic and market trends at a glance
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Editor: Alessandro Fezzi,
Source: LGT Bank (Switzerland) Ltd.
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Reference regarding analysis history
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Reference regarding valuation rates
Unless otherwise stated or specified, the rates used in the analysis are normally the share prices provided by the news agencies Reuters and/or Bloomberg at the close of the stock exchange of the domestic market of the analyzed security or the relevant principal market of this security on the respective local stock exchange on the eve of the day of compilation.
Explanation of investment recommendations for stocks
We apply a “hybrid approach” (internal fundamental analysis combined with “theScreener”, an external, purely quantitative analysis tool). TheScreener is based on purely quantitative, i.e. computable variables such as (but not exclusively restricted to) profit adjustments of the past few weeks, stock valuation in relation to historical performance and comparison groups, the technical trend, performance in relation to the market etc. The assessment of the equity analysts, which is largely based on a qualitative analysis, does not need to match with the one of theScreener. For the overall judgement the assessment of the equity analysts overrides the one of theScreener. LGT Bank (Switzerland) Ltd. categorizes its analysis recommendations into five ratings: for a “Buy” recommendation we expect a relative outperformance compared with the sector. Only equities subjected to an internal fundamental analysis can be rated “Buy”. The recommendation “Attractive” is used for equities exclusively ranked by theScreener without any internal fundamental analysis as “slightly positive” or “positive”. A moderate relative outperformance versus the index is expected. For equities that we rate as “Hold” we expect a performance largely in line with the one of the sector. This can comprise both equities for which a fundamental analysis has been carried out as well as equities that theScreener ranks as “neutral” versus the index. The recommendation “Unattractive” is used for equities exclusively ranked by theScreener without any internal fundamental analysis as “slightly negative”. A moderate relative underperformance versus the index is expected. By contrast, “Sell” recommendations are based on the expectation of a relative underperformance compared with the sector. This can comprise both equities for which we are recommending “Sell” for fundamental reasons as well as equities that theScreener ranks as “negative” versus the index. Therefore the ratings always reflect a relative consideration versus the sector and/or specified index. The risk assessment is based on the individual judgement of the analyst (e.g. we assume a “high” risk for illiquid shares, highly indebted companies or shares from developing countries).
Reference regarding share valuation basis: The analysis compiled by LGT Bank (Switzerland) Ltd. are essentially based on secondary research relating to fundamental and quantitative analysis. Generally accepted valuation methods (valuation multiples, return figures, sector comparisons, comparisons with past valuations etc.) are used for this. The forecasts for the quantitative analysis are prepared with the help of mathematical-statistical procedures (see statements above concerning the analysis tool “theScreener”). Economic indicators such as interest rates, currencies, commodity prices and assumptions relating to the economy are included in the overall assessment. The mood of the market also affects the company valuation. Moreover, many of the approaches are based on estimates and expectations that may change quickly and without warning, depending on developments specific to the industry. Therefore, the recommendations derived from the analysis can also change accordingly. The investment judgements generally refer to a period of 6 to 12 months. However, they are also subject to market conditions and represent a snapshot of the situation. They may be achieved more quickly or more slowly or be revised upwards or downwards.
Explanation of investment recommendations for bonds
We employ both qualitative and quantitative methods to derive our recommendations, which are to be seen as relative to sector/quality peers among comparable maturities. “Buy” and “Sell” recommendations demand a qualitative in-house analyst opinion, in which we incorporate both historical and projected financial results and credit metrics as well as past and anticipated company and sector-specific observations and trends. We recommend “Buy” for a security for which we expect a strong relative outperformance compared to sector/quality peers among comparable maturities. We recommend “Sell” if we expect strong relative underperformance compared to sector/quality peers among comparable maturities. The ratings “Attractive”, “Hold” and “Unattractive” can be based purely on a quantitative approach, which includes the market price of credit risk, valuation of equities and associated instruments, corporate leverage, liability structure, size, and agency rating. We recommend “Attractive” for a security for which we expect a relative outperformance compared to sector/quality peers among comparable maturities. We recommend “Hold” if we expect an average performance compared to sector/quality peers among comparable maturities. We recommend “Unattractive” if we expect a relative underperformance compared to sector/quality peers among comparable maturities.
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Definition of rating categories of S&P and Moody’s which are relevant for us:
AAA/Aaa: Borrower with highest credit quality. Default risk also virtually negligible over the longer term
AA/Aa: Safe investment, default risk virtually negligible but more difficult to assess in the longer term
A: Safe investment as long as no unforeseen events impair the overall economy or sector
BBB/Baa: Average investment. However, problems must be expected if the overall economy deteriorates
BB/Ba: Speculative investment. Defaults must be expected if the economic situation deteriorates
B: Highly speculative investment. Defaults are likely if the economic situation deteriorates
For more information on our methodology for bonds, please contact your LGT relationship manager or your local LGT Group company.
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This recommendation was prepared by LGT and not by an independent financial analysis department. Therefore this recommendation does not meet all the statutory requirements for guaranteeing the impartiality of financial research. The Swiss Bankers Association Directives on the Independence of Financial Research do not apply to this recommendation. Investments in structured products entail a wide range of risks. Investment decisions should therefore only be made on the basis of the valid prospectus or complete documentation following consultation with an expert. This does not constitute financial analysis within the meaning of the Liechtenstein Ordinance on the Preparation of Financial Analysis according to the Law against Market Abuse in the Trading of Financial Instruments.
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