Stock markets in Asia were trading lower on Monday after the major indices on Wall Street dropped to finish last week. The uncertainty around the conflict in the Middle East as well as soaring Treasury yields remain on investors’ minds. Gold was up 2.5% last week, it’s second consecutive week of gains, underscoring the risk-off mood on markets. Big Tech earnings could come to the recue this week with earnings due from several high-profile US tech companies.
Geopolitical tensions remained a drag on markets as investors continue to wait for an Israeli ground offensive in the Gaza Strip. Clashes with the Hezbollah militant group on the northern border with Lebanon at the weekend were stirring up fears that the crisis could broaden into a regional conflict. Meanwhile, the US and several European countries issued a statement in support of Israel.
In the Asia-Pacific region, stock markets started the week on a cautious note. Traders are awaiting inflation figures from the region this week, notably for Tokyo on Friday. Tokyo’s inflation figures are generally considered a leading indicator for Japan’s national inflation. In Tokyo, the Nikkei 225 was down 0.6% in Monday trading and South Korea’s Kospi lost 0.7%. In Australia, the S&P/ASX 200 was trading 0.9% lower. The Consumer Price Index (CPI) for Hong Kong came in hotter than expected in September at 2% when compared with the same month a year earlier. Hong Kong's Hang Seng Index was down 0.7%, while the Shanghai Composite fell 0.8%.
In New York, stock indices were similarly weak to end last week. The Dow Jones Industrial lost 0.9% on Friday and the S&P 500 fell 1.3%. Tech stocks led losses, with the Nasdaq-100 down 1.5%.
Monday is a bit slower on the earnings front, but the rest of the week will give investors plenty of material to digest. Big Tech takes centre stage later this week with firms such as Alphabet (Tuesday), Microsoft (Tuesday), Meta (Wednesday) and Amazon (Thursday) presenting quarterly figures.
Wrapping up last week’s economic data, German producer prices plummeted in September in year-on-year terms as the effects of price spikes related to the war in Ukraine last year disappeared from the comparison period. Producer prices dropped 14.7% in September of 2023 when compared with the same month of 2022. In September 2022 producer prices spiked more than at any time on record, gaining 45.8%. Consumer inflation in Germany was also coming down rapidly having gained 4.3% in September. That number is still more than double the European Central Bank’s inflation target of 2%.
Corporate news in focus: Philips Q3 figures.
Economic data in focus: Swiss M3 money aggregate (09:00 CET), EU and euro zone Consumer Confidence Indicator (16:00).
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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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).
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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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