Investors were cautious ahead of earnings from chipmaking giant Nvidia and the minutes of the meeting of the Federal Open Market Committee, both due later on Wednesday. US stocks dropped after reopening from a long weekend while Asian stocks were mixed midweek.
In New York, stock indices slipped after reopening from the long Presidents' Day weekend. The Dow Jones Industrial lost 0.2% and the S&P 500 dropped 0.6%. The Nasdaq-100 lost 0.8%, dragged down by heavyweight chipmakers like Nvidia (-4.4%) and AMD (-4.7%). On Wednesday, Nvidia, one of the so-called "Magnificent 7" US tech giants, reports earnings figures. The company’s stock is up about 40% since the start of the year.
Looking beyond the chip sector, Walmart shares gained 3.2% after the company reported adjusted earnings of USD 1.80 per share versus a consensus of USD 1.65. The retail giant provided a slower sales guidance of around 3%-4% for the current fiscal year, noting that consumers are becoming choosy in their purchasing decisions. Spending for basic goods and groceries remains strong, but spending on discretionary products is stalling as consumers look for cheaper substitute goods.
In the Asia-Pacific region, stock markets were mixed. Hong Kong's Hang Seng Index gained 2%, while the Shanghai Composite was up 1.3%. Beyond China, stocks were mostly in the red. In Tokyo, the Nikkei 225 closed 0.2% lower on Wednesday after business morale at Japanese manufacturers came in weak. The Reuters Tankan survey dropped to -1 in February compare with January’s +6, signalling more pessimists among Japanese manufacturers than optimists for the first time in ten months. Meanwhile, Japanese exports rose more than expected at 11.9% in January but the figure was likely distorted due to the Lunar New Year festivities falling in January last year. South Korea’s the Kospi fell 0.2%. Australia’s S&P/ASX 200 dropped 0.7% after annual pay growth increased to 4.2% in the fourth quarter, the fastest pace in 15 years. The country’s central bank listed wage growth as one of the reasons for keeping interest rates unchanged at its last policy meeting.
In the euro zone, wages increased by 4.5% in the fourth quarter, slowing from 4.7% in the previous quarter. Slower wages calmed traders’ fears that high wages could fuel further inflation, pushing back the European Central Bank’s (ECB) timeline for lowering interest rates. The retreat comes after wages growth quickened from just over 1% in the third quarter of 2021. Falling wages quell fears of a so-called wage-price-spiral, but just one quarter of falling pay data is unlikely to be particularly reassuring for the ECB. If the central bank wants to be reassured that wages are falling sustainably in the euro zone, it will have to wait for first-quarter data due in May before making a decision at its monetary policy meeting in June.
Corporate news in focus: Quarterly figures from Glencore, Marathon, Nvidia, Rio Tinto.
Economic data in focus: EU and euro zone Consumer Confidence Indicator, FOMC meeting minutes.
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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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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