Markets were mixed mid-week as traders positioned themselves ahead of the central bank symposium in Jackson Hole in the US state of Wyoming. A series of Purchasing Managers’ Indices (PMI) from various countries throughout the day should provide some stimulus while chipmaker Nvidia’s results are highly anticipated after the US market close on Wednesday.
In Asia, stock markets were reacting to PMI data coming out of many countries on Wednesday. The Nikkei 225 was trading up 0.44% after Japan’s flash PMI for August came in at 54.3 points, up from July’s 53.8 points. In Australia, business activity was less positive, with the country’s flash composite PMI reading at just 47.1 points, the fastest contraction in 19 months. A reading below 50 points signals contraction. Australia’s S&P/ASX 200 nevertheless gained 0.6% in early trading Wednesday. In South Korea, the Kospi was down 0.5%. Chinese markets were mixed with Hong Kong's Hang Seng Index up 0.5%, while the Shanghai Composite lost 0.6%.
In New York, equity markets struggled to hang on to moderate gains from the start of the week. Focus was shifting from the surge in US Treasury yields to Jackson Hole and chipmaker Nvidia’s earnings. The Dow Jones Industrial lost 0.51%, falling to 34,288.83 points and the S&P 500 dropped 0.28%, closing at 4387.55 points on Tuesday. The Nasdaq-100 lost 0.19%, ending the day at 14,908.96 after surging 1.7% the day before.
Shares of chipmaker Nvidia remained highly volatile, falling 2.77% on Tuesday after gaining 8.47% on Monday. Traders continued to speculate about the company’s second-quarter earnings – due out later Wednesday. In May, the company had caused excitement among investors after posting a strong outlook, driving the company’s shares to a record high. The quarterly results should show to what extend the company can capitalize on the AI trend.
Microsoft submitted a new deal to regulators in the UK regarding its planned takeover of gaming company Activision Blizzard. UK regulators had rejected the original plan. Shares of Activision Blizzard were up 1.04%.
Sales of non-new homes in the US fell to their lowest level this year due to a lack of homes for sale and higher borrowing costs. Signed sales contracts in July fell by more than 18% when compared with the same month a year earlier. Mortgage rates have increased rapidly and have more than doubled in the last years with the average 30-year fixed rate home loan now beyond 7%.
Corporate news in focus: Q2 figures from Nvidia.
Economic data in focus: Manufacturing and Services Purchasing Managers’ Indices from several countries throughout the day, US new residential sales (16:00 CET), eurozone Consumer Confidence Indicator (16:00), weekly US EIA Petroleum Status Report (16:30).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
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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