Investors on stock markets seem to have regained some confidence at the end of a turbulent last week. Their fears of high interest rates receded somewhat into the background for the time being, following the latest data on consumer inflation expectations. Today, a data-heavy week started on a positive note in Asia.
Looking at the week ahead, the bulk of macroeconomic data will be released in its second half, with Germany’s Consumer Price Index due out Wednesday. On Thursday, gross domestic product figures are set to be announced from the US and Switzerland. To finish the week, traders will sort through Friday’s consumer inflation data out of the euro area and US personal consumption expenditures for any clues as to when price increases could slow to the point that the Federal Reserve and European Central Bank begin cutting rates.
Falling inflation expectations by consumers weren’t enough to save US equity markets late last week. Consumers in the US now expect prices to increase 3.3% annually, down from a previous 3.5% expectation. The University of Michigan survey also yielded a final value for the Consumer Sentiment Index of 69.1, down 8.1 points from the previous month. Market participants however didn’t seem confident that the weakening consumer sentiment would be enough to convince the Federal Reserve that lower rates are needed. The Dow Jones Industrial closed at 39,069.59 points nearly flat compared to the last close. The S&P 500 gained 0.7% on Friday, closing at 5304.72 points, while the Nasdaq indices rose almost 1%.
In the Asia-Pacific region, stock markets rose on Monday after official data showed China's industrial profits grew in the first four months of the year. The People's Republic's industrial profits increased 4.3% year-on-year in the January-April period. Mainland China's benchmark CSI 300 index rose 0.2%, while the Hang Seng index in Hong Kong gained 0.4%. In Tokio, the Nikkei 225 rose 0.2% and the broader Topix was up 0.3%, recovering from Friday's losses. South Korea's Kospi traded up around 0.5%. Australia's S&P/ASX 200 gained 0.8%, snapping a four-day losing streak. Australia will release its inflation data for April on Wednesday.
The final estimate for German gross domestic product (GDP) came in at 0.2% growth in the first quarter. While this growth is moderate, it is a leap from the previous quarter’s contraction of 0.5% and has helped Europe’s largest economy avoid recession. Particularly construction and trade helped bolster economic growth to start the year.
Elsewhere in Europe the macroeconomic data was less rosy to end the week, with UK retail sales dropping at the fastest pace so far in 2024. Retail volumes fell 2.3% in April, a much larger decrease than economists’ expectations.
Corporate news in focus: There is no major corporate news scheduled today.
Economic data in focus: Germany’s ifo Business Climate Index.
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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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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Country-specific information
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