Stock markets managed to squeeze out mild gains to finish Friday’s session, despite suffering during the week. For most of last week, concerns about growth prospects in China and Europe dampened market sentiment, but this week investors’ focus is likely to shift toward central banks with a European Central Bank (ECB) policy rate decision due on Thursday and a Federal Reserve (Fed) decision set for next week.
In New York, stock indices closed slightly in positive territory, despite being under pressure most of the week. The Dow Jones Industrial gained 0.2% and the S&P 500 put on 0.1% during Friday’s session. The Nasdaq-100 also closed 0.1% higher on Friday.
In Europe, stocks also managed to stabilize at the end of the week with the Stoxx Euro 600 finishing Friday’s session up 0.2%, breaking a seven-day losing streak.
In Asia, stock markets were mixed to start the new week. In China consumer prices appeared to be stabilizing with deflationary pressures easing. The Consumer Price Index (CPI) increased 0.1% for August on Monday when compared with the same month a year earlier. It was down 0.3% when compared with July. Hong Kong's Hang Seng Index slipped 0.9%, while markets in mainland China were doing much better with the Shanghai Composite up around 1%. Shares of Chinese tech giant Alibaba were tumbling 2.7% after the company said its departing chief executive officer will not leave the company as originally announced to focus on its cloud business.
Outside of China, Tokyo’s Nikkei 225 was trading down 0.5%, while in South Korea, the Kospi gained 0.2%. In Australia, the S&P/ASX 200 was trading 0.3% higher on Monday.
Gas futures in Europe spiked at the end of the week after strikes began at two Chevron liquefied natural gas (LNG) facilities in Australia, which account for around 7% of global supply. The jump in LNG prices comes in the same week when Brent oil prices broke the 90-dollar mark with oil prices marching higher since June. High energy prices are a concern for central banks, which are still trying to bring inflation down to target levels. The energy market situation is particularly interesting in Europe after the continent saw spikes in prices last year due to supply concerns surrounding the war in Ukraine.
Data released last week showed consumer prices in Germany were remaining stubbornly high. Inflation, measured by the Consumer Price Index, was 6.1% in August when compared with the same month a year earlier. That is slightly lower than the 6.2% figure from July. Higher energy and food prices were at the root of the price increases as well as a base effect related to a reduced fare train ticket available last year in Germany, which drove inflation up, the Federal Statistical Office said. Germany’s DAX closed Friday’s session up 0.1%.
Corporate news in focus: Roche’s Pharma Day 2023, first-quarter figures from Oracle.
Economic data in focus: Italian industrial production (10:00 CET).
All about global economic and market trends at a glance
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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.
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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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Country-specific information
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