Insights et vue du marché
Share prices currently remain strongly dependent on movements on the bond markets. Yields on ten-year US government bonds returned to the 4%-mark, thus depressing prices on Wall Street. In addition, a slump in the shares of the investment house Goldman Sachs weighed on stock market sentiment in New York. In Asia, the stronger-than-anticipated manufacturing PMI laid the ground for partially strong gains on stock markets.
The Dow Jones Industrial closed on Tuesday with a daily loss of 0.71% at 32’656.70 points. The S&P 500 fell by 0.3% to 3’970.15 points and on the Nasdaq, the indices ended yesterday with a moderate minus of around 0.15%. The balance for February is mixed for the US indices: While the Dow lost more than 4%, the technology-heavy Nasdaq indices were able to just about hold their level from the end of January. Goldman Sachs shares fell by almost 4% after the Wall Street house announced at its investor day that it was looking for a strategic alternative for its loss-making private client business. On the bond market, the yield on ten-year US government bonds initially climbed to 3.98% and is currently trading at 3.95%, close to the 4%-mark. On the foreign exchange market, the US dollar pushed the euro back below 1.06.
The stock markets in the Asia-Pacific region mostly rose in the middle of the week. The Hang Seng Index in Hong Kong rose by around 3.5%, leading the gains in the region. The Hang Seng tech index climbed more than 5%. On the Chinese mainland, the Shanghai Composite rose by 0.6% and the Shenzhen Component by 0.9%. Positive momentum was provided by the official Purchasing Managers' Index for China's manufacturing sector. The PMI reached 52.6 points in February (January: 50.1), the highest level since April 2012, and thus clearly exceeded expectations. In Tokyo, the Nikkei 225 rose moderately by 0.25%.
Corporate news in focus today: Kuehne & Nagel, Georg Fischer, Swiss Life, Beiersdorf, Puma and Reckitt Benckiser with annual figures as well as Tesla’s investor day.
Economic data in focus today: German consumer prices (14:00 CET) and the ISM purchasing managers' survey on the situation in the US industry (16:00 CET).
In France, consumer prices surprisingly rose in February. At 7.2%, the inflation rate in the second largest economy in the eurozone reached the highest annual rate since the introduction of the euro. In January, the inflation rate stood at 7.0% and economists had expected an unchanged level. In a monthly comparison, price pressure increased significantly with a 1.0% rise in consumer prices. This was mainly due to higher prices for food and services.
In Spain, too, inflation surprisingly rose again in February. Consumer prices rose by 6.1% year-on-year, compared to an inflation rate of 5.9% at the beginning of the year. Compared to the previous month, Spanish consumer prices also rose by 1.0%.
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
If this analysis was made available to any issuers mentioned in the publication prior to its distribution or publication, no changes were made to the price or rating after the issuer’s feedback. Important references for Liechtenstein can be found in articles 3 to 6 FinMV [Financial Analysis Market Abuse Ordinance], for Switzerland in the Swiss Bankers Association Directives on the Independence of Financial Research, and for Austria in section 48 BörseG [Stock Exchange Act], the Austrian analysis principles of the Österreichische Vereinigung für Finanzanalyse und Asset Management [Austrian Association for Financial Analysis and Asset Management, ÖVFA] and the Austrian Society of Investment Professionals (ASIP) and the Standard Compliance Code of the Austrian banking sector. A history of all ratings and recommendations is available at your LGT relationship manager.
Essential sources of information
Our analysts draw on publicly accessible information we consider to be reliable. For the compilation of the analysis, publications by domestic and foreign media and news services (e.g. Reuters, Bloomberg, VWD etc.), business publications, trade publications, statistics and rating agencies were used, together with information from the issuers of the analyzed securities – mainly via the Internet, but also in writing or by telephone. We also procure information from investment banks (sell-side research and primary research).
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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