The much-anticipated inflation data from the US is due out today. US consumer prices are expected to have risen slightly at the end of last year. This could prolong the Federal Reserve's pause on interest rates for the time being. On Wall Street, stock indexes posted gains in the middle of the week. In Tokyo, the fireworks continued, with the Nikkei 225 rising above 35,000 for the first time since February 1990.
In New York, both the main indices and the tech-heavy Nasdaq posted solid daily gains. The Dow Jones Industrial closed 0.45% higher at 37,695.73 and the broader S&P 500 rose 0.57% to 4,783.45. The Nasdaq 100 was up just under 0.7%, driven by gains in major technology stocks such as Microsoft, Alphabet and Nvidia. The focus now shifts to this afternoon's (14:30) US inflation data. This will be a key factor for the Federal Reserve in setting monetary policy. According to the Fed, the battle against inflation has not yet been won and a renewed rise in consumer prices could at least prolong the pause in interest rates or delay the long-awaited easing of interest rates in the capital markets. Meanwhile, the benchmark ten-year US Treasury yield remains just above 4%.
Most Asian stock markets continued to recover from the weak start to the year. The Nikkei 225 rose a further 1.8% to close above 35,000 for the first time since February 1990. The Topix also rose by 1.6%, reaching a 33-year high. South Korea's Kospi rose 0.5% after the Bank of Korea left its key interest rate unchanged at 3.50% for the eighth consecutive meeting. In Hong Kong, the Hang Seng Index gained around 1.7% and the Chinese CSI 300 Index was up 0.4%. In Australia, the S&P/ASX 200 was up 0.5% for the day, recovering from Wednesday's losses.
According to ECB vice-president Luis de Guindos, the decline in eurozone inflation will continue at a slower pace this year, but the pace of inflation decline observed in 2023 is likely to slow in 2024. This is despite weaker economic growth in the euro area. Looking ahead to the second half of 2023, the ECB Vice-President sees a risk of a technical recession.
Corporate news in focus: Suedzucker Q3.
Economic data in focus: European Commission Economic Bulletin (09:00), Italy Industrial Production November (09:00), US Consumer Prices December and Initial Jobless Claims Weekly (14:30).
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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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.
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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
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