Navigator November 7, 2014 Draghi keeps options for additional measures The European Central Bank (ECB) left interest rates unchanged at record lows. President Mario Draghi said he is ready to boost stimulus to the economy if needed dismissing a rift in the central bank’s committee. While the ECB has already expanded its range of asset purchases, it has not (yet) committed itself to broad-based bond buying, or quantitative easing. Earlier, the European Union Commission cut its growth forecast and German factory orders came in weaker than expected. The Bank of England as well held its benchmark rate at a record-low 0.5%, as a worsening European economy impacts Britain’s recovery. Equity markets remain supported by the outlook for a sustained low-interest environment. Today, markets are awaiting the U.S. labor market report, which is expected to show sustained payrolls growth in October. Meanwhile, fewer Americans than forecast filed applications for unemployment benefits last week. Indices Current Previous Day (%) MSCI World 1'707.53 Dow Jones 17'554.47 0.4 2'031.21 0.38 Nasdaq 100 4'164.08 0.26 Nikkei 225 16'880.38 0.52 SMI 8'863.88 0.23 SLI 1'311.18 0.17 Euro Stoxx 50 3'102.07 0.34 337.08 0.21 DAX 9'377.41 0.66 FTSE 100 6'551.15 0.18 Equity – Allianz reports solid Q3 and promises higher dividends Allianz posted Q3 earnings that were slightly better than anticipated (net income EUR 1.61bn vs. consensus EUR 1.57bn). Outflows at Pimco of EUR 49.2bn were about as expected. The insurer intends to achieve its upper end of the operating target of EUR 10.5bn after this solid result, and promises its shareholders higher dividends. Swiss Re reported 14% higher Q3 net income of USD 1.23bn, thanks to lower losses from natural catastrophes, beating market expectations of CHF 920m clearly. The world’s second-biggest reinsurer is on a good track to meet its targets for 2015. Richemont has slightly missed market expectations in the 1H. Like other companies in the luxury goods sector the Swiss company has suffered from a weak business in Asia. Walt Disney met expectations with a solid Q4 result. The entertainment company benefited from blockbuster success in movie theaters and strong merchandising. Indices Emerging Markets Current Previous Day (%) MSCI Emerging Markets 991.32 -0.71 MSCI EM Asia 459.25 -0.12 MSCI EM Eastern Europe 151.79 -2.74 3'016.11 -2.01 52'637.06 -1.98 1'106.65 -3.27 Fixed Income – Euro periphery bonds advance after ECB meeting Spanish government bonds advanced for the first time in four days as European Central Bank President Mario Draghi said officials were unanimous on being willing to introduce further stimulus measures if needed. Italian securities also climbed as Draghi said the ECB’s current stimulus policies will have a significant impact on its balance sheet, causing it to expand toward the level it was in March 2012. The central bank, which has already started purchases of covered bonds, is set to start buying asset-backed securities this year. Benchmark German 10-year bunds were little changed. Spain’s 10-year yield fell six basis points, or 0.06 percentage point, to 2.14%. The rate on similar-maturity Italian debt dropped seven basis points to 2.36%. The yield of the German 10-year note was about 0.83%. Furthermore, Spain issued bonds on the primary market with maturities of up to ten years, and France issued also three bonds. Returns S&P 500 Euro Stoxx 600 MSCI EM Latin America Brazil IBOVESPA Russian Depositary Index NIFTY Index 0.06 8'320.65 -0.21 23'575.28 -0.31 HFRX Global HF Index 1'221.33 0.26 LPX50 Listed PE TR (EUR) 1'504.39 0.21 259.17 -0.65 Current Previous Day (%) US Treasury Bonds 10Y (USD) 2.39 0 German Bund 10Y (EUR) 0.84 0.97 Swiss Government 10Y (CHF) 0.46 -0.22 United Kingdom 10Y (GBP) 2.25 -0.66 Japan 10Y (JPY) 0.48 2.77 3 month LIBOR (USD) 0.23 -0.11 3 month LIBOR (EUR) 0.06 -8.33 3 month LIBOR (CHF) 0.01 -18.18 Global IG Corporate Spread 1.15 0 Global HY Corporate Spread 4.13 -0.37 2.9 0.01 Hang Seng Index BBG NA REITS EM Hard Currency Gov. Spread 1/3 Earnings calendar Date 06.11. 07.11. 2014 07.11. 2014 07.11. 2014 11.11. 2014 11.11. 2014 11.11. 2014 11.11. 2014 12.11. 2014 12.11. 2014 12.11. 2014 2014 Ctry CH LU DE IT IT DE DE GB GB US DE Forex Company TRANSOCEAN LTD ARCELORMITTAL RHOEN-KLINIKUM AG TELECOM ITALIA SPA ENEL SPA HENKEL AG & CO KGAA VORZUG STROEER MEDIA SE VODAFONE GROUP PLC BURBERRY GROUP PLC CISCO SYSTEMS INC DEUTSCHE POST AG-REG Period Q3 Q3 Q3 Q3 Q3 Q3 Q3 S1 S1 Q1 Q3 Consensus EPS 4.54 0.61 0.46 0.07 0.32 4.31 0.97 0.07 0.77 2.16 1.72 Economic data calendar Date 07.11. 07.11. 2014 07.11. 2014 07.11. 2014 07.11. 2014 07.11. 2014 07.11. 2014 07.11. 2014 07.11. 2014 07.11. 2014 07.11. 2014 2014 CET 08:00 08:00 08:00 08:30 08:45 14:30 14:30 14:30 14:30 14:30 14:30 Ctry DE DE DE FR FR US US US US US US Current Previous Day (%) 1.2388 1.2038 0.9717 1.5387 1.5834 115.29 7.7527 1.2965 6.1179 8.4958 9.205 0.1051 0.059 0.1647 0.143 0.0126 -0.0694 0.0026 -0.0386 -0.0866 0.1718 -0.0141 Current Previous Day (%) 77.69 82.33 1'143.82 15.36 1'193.65 754.50 12 529.71 3'165.32 116.93 953.54 -0.28 -0.64 0.17 -0.39 -0.13 0.45 -0.79 0.09 0 -0.06 -0.04 EUR/USD EUR/CHF USD/CHF GBP/CHF GBP/USD USD/JPY USD/HKD USD/SGD USD/CNY EUR/NOK EUR/SEK Commodities Indicator Exports (m/m) Imports (m/m) Industrial Production (m/m) BdF Business Sentiment Industrial Production (y/y) Private Payrolls Non-farm Payrolls Labor Force Participation Rate Manufacturing Payrolls Underemployment Rate Unemployment Rate Period Sep Sep Sep Oct Sep Oct Oct Oct Oct Oct Oct Cons 2.6 1.1 2.3 95.8 -0.3 225.77 236.62 9.96 5.89 Prev. 5.5 5.4 1.4 96.11 -0.3 24 25 62.7 40 11.8 5.9 Oil Future Nymex WTI (USD) Oil Future Brent (USD) Gold-ounce (USD) Silver-ounce (USD) Platinum (USD) Palladium (USD) JOC Industrial Metals Index S&P (USD)GSCI Index Spot Indx Rogers Int. Commodity Index BBG Commodity Index Rogers Agriculture TR Index Topics LGT looks at Topics Description Publication Type Return expectations on bonds An unintended mismatch of return expectations and risk tolerance bears Investment Focus potential for disappointment. Therefore, we advise our clients to align their return targets with their risk capacity. This primer's purpose is to give some guiddance on how to derive suitable bond market return expectations. 06.11.2014 Regulatory impacts on banks The consequences of the upcoming ECB stress test and the changing regu- Investment Idea latory environment as well as resulting investment possibilities are disResearch publication cussed. 20.10.2014 Profiting on strong USD Transatlantic divergences benefit the USD as the U.S. and Europe drift apart economically and on monetary policy. Selected companies could benefit from these developments. 16.10.2014 Elections in Brazil The uncertainties of the outcome of the heads up between president Investment Idea Rousseff and her contender Neves offer asymmetric investment opportuni- The Beacon ties. 14.10.2014 Gold Call writing strategy on gold offers value in a gold market with support stemming from physical demand out of China and India and the absence of a save haven scenario. 03.10.2014 Investment Focus Investment Focus published For further information, please contact your LGT relationship manager. Impressum Published by: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8022 Zuerich Editorial: Alessandro Fezzi, +41 44 250 78 59, email: [email protected] Authors Equities: Georg Ruzicka, Andreas Riedel, Dr. Tilman Dumrese Authors Fixed Income: Maurice Jiszda, Daniel Rotzer, CFA Sources: Bloomberg, LGT Bank (Switzerland) Ltd. 2/3 Risk Disclosure (Disclaimer) This publication is for your information only and is not intended as an offer, solicitation of an offer, or public advertisement to buy or sell any investment or other specific product. Its content has been prepared by our staff and is based on sources of information we consider to be reliable. However, we cannot provide any confirmation or guarantee as to its being correct, complete and up to date. The circumstances and principles to which the information contained in this publication relates may change at any time. 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This publication is not intended for persons subject to legislation that prohibits its distribution or makes its distribution contingent upon an approval. Any person coming into possession of this publication shall therefore be obliged to find out about any restrictions that may apply and to comply with them. In line with internal guidelines, persons responsible for compiling this report are free to buy hold and sell the securities referred to in this report. 3/3