market report
Status: 07/12/2022 07:40 a.m
The DAX is likely to build on its losses from the previous day and start the trading day weaker. Perhaps the start of the US reporting season will bring fresh positive impetus.
Gas crisis in Europe, the risk of renewed China lockdowns, supply chain problems – the negative influencing factors remain diverse: The broker IG estimated the leading index 0.69 percent lower to 12,744 points before the start of trading. Yesterday, the DAX fell below the 13,000 mark again and ended trading 1.4 percent weaker at 12,832 points. The uncertainties surrounding future gas deliveries from Russia had put an end to previous recovery attempts on Europe’s stock exchanges.
Inflation also remains an important topic: “Anything that gives investors hope in the coming weeks that key interest rates will not be raised so drastically could lead to a strong bear market rally on the stock market,” comments Jochen Stanzl from the online Broker CMC Markets. The current US consumer prices will be published on Wednesday, which can cause movement on the market for the reasons mentioned.
Companies are becoming more skeptical
Meanwhile, German companies are looking to the future with much more skepticism because of the consequences of the Ukraine war. Expectations in terms of production, employment and investments became increasingly clouded for 2022, according to a study by the IW Institute of around 2,300 companies, which was available to Reuters on .
According to this, 37 percent expect an increase in production compared to 2021 and a quarter expect a minus. However, the balance of positive and negative business expectations in June was only twelve percentage points, after 34 in late autumn 2021 and 15 in spring 2022. A recession is looming, especially in construction. “Material bottlenecks, high cost increases and a lack of employees are slowing down economic activities here.”
Wall Street weaker ahead of earnings season
Fearing disappointing earnings figures as a result of rising inflation, US investors sold shares at the beginning of the week. The Dow Jones closed 0.5 percent lower at 31,173 points. The Nasdaq fell 2.3 percent to 11,372 points. The S&P 500 lost 1.2 percent to 3854 points.
“People are concerned not only that earnings will be weak due to an economic slowdown, but also because of the strengthening US dollar creating headwinds for multinational companies’ earnings,” said Robert Pavlik, portfolio manager at Dakota Wealth Management.
Big banks like JPMorgan, Citigroup and Morgan Stanley will report their results later in the week. Today it’s Pepsico’s turn. Investors will be watching to see if a slowdown in economic growth translates into numbers as banks are seen as an indicator of economic development.
Compared to the same quarter of the previous year, analysts expect an average increase in profits and sales of the S&P 500 companies of around four and ten percent, respectively, says Ulrich Stephan, chief investment strategist for private and corporate customers at Deutsche Bank.
Setback also in Asia
The prospect of further tightening of monetary policy, the renewed outbreak of corona in China and the energy shortage in Europe weighed on the markets in Asia on Tuesday. The Nikkei was 1.7 percent lower at 26,363 points. The Topix index fell 1.5 percent to 1887 points.
The Shanghai stock exchange was down 0.6 percent. The index of the most important companies in Shanghai and Shenzhen lost 0.8 percent. “The mood in global markets is one of risk aversion,” said Yuting Shao, macro strategist at State Street Global Markets.
Euro continues to fall
The euro has fallen further and is only just above par with the US dollar in the morning. At times, the common currency was trading at $1.0006, its lowest level in 20 years. In recent trading days, the euro has repeatedly reached its lowest levels since 2002.
The euro was once again put under pressure by the strength of the dollar. The American currency was able to gain against almost all other major currencies in the morning. Due to high inflation, the US Federal Reserve is likely to continue its aggressive tightening policy and raise interest rates significantly, which will give the dollar a boost.
Change of boss and drop in sales at Gap
Gap has announced a change at the top of the group. CEO Sonia Syngal is resigning with immediate effect, the fashion group announced. First of all, Executive Chairman Bob Martin will take over his duties on an interim basis. Sales in the second quarter are likely to decline by a high single-digit percentage, it said. Gap lowered its full-year targets at the end of May.
Twitter lawyers: Musk’s withdrawal from purchase agreement is invalid
Twitter is preparing for a legal battle with tech billionaire Elon Musk over his attempt to call off the takeover of the online service. In a letter to Musk’s legal representative, Twitter’s lawyers said his termination of the deal was “invalid and unlawful” from the company’s perspective. Contrary to Musk’s claims, Twitter did not violate the acquisition agreement, the letter said. Musk, on the other hand, knowingly and intentionally violated the agreement with his withdrawal.
Twitter has already announced that it wants to go to court at the company’s official headquarters in the state of Delaware. There, the Delaware Chancery Court can also order the completion of a takeover.
Insurance startup WeFox valued at $4.5 billion
The German-Swiss insurance startup WeFox is now valued at $4.5 billion by its investors. In the most recent round of financing, WeFox collected a further 400 million dollars in equity and debt capital, as the Berlin-based company announced. “We are well financed and actually didn’t need any money,” said CEO and co-founder Julian Teicke. “But we have received many inquiries from investors. Now we see an opportunity to use the crisis and grow more aggressively than planned.”