Status: 10/10/2022 6:09 p.m
Was that it again with the rest? In the end, the DAX did not make any progress at the start of the week. The all-dominant topic of interest rates simply cannot be shaken off.
At the end of a changeable session, the DAX closed down 0.06 points almost at its closing level on Friday. At times, the federal government’s gas relief package, which is currently being discussed, supported prices. With a two-step plan consumers and the economy could be relieved of around 96 billion euros in gas and district heating prices.
When support from Wall Street failed to materialize, things went down again in Frankfurt as well.
Interest rate discussion weighs on US stock exchanges
After a positive start, the Dow Jones drifted slightly into the red. The technology stocks on the Nasdaq fall more sharply. The Columbus Day holiday is dampening business. That is why the US bond markets remain closed.
The US markets closed much weaker on Friday after a robust jobs report, the leading index Dow Jones lost 2.1 percent. The strength of the jobs market had fueled fears that the Fed would remain tight on monetary policy. “The market participants who had hoped that the central banks would put the brakes on interest rates were caught on the wrong foot,” said market observer Christian Henke from broker IG.
US currency watchdog Charles Evans has countered concerns on the financial markets that the Federal Reserve (Fed) will stall the economy with its aggressive interest rate policy. “I think we can bring inflation down relatively quickly while avoiding a recession,” said the Chicago Fed District chief. He reiterated his expectation that interest rates would “rise to just over 4.5 percent” early next year. The Fed has already raised interest rates by three quarters of a percentage point three times in a row – most recently to the range of 3.00 to 3.25 percent. A fourth big step is expected on the financial markets in November.
Against this background, market participants are eagerly awaiting the September inflation data next Thursday. BayernLB experts expect a slight decline to 8.1 percent. However, the important core rate excluding energy and food prices could well have risen.
This week also marks the start of the reporting season for the third quarter in the USA with the balance sheets of the big banks. According to experts, the suffering German stock market could benefit from this, because they believe that a lot of bad news is now included in the prices.
Euro falls back again
Meanwhile, the euro remains under pressure. By early evening, the common currency had fallen back just below $0.97. The prospect of continued tough Fed stance is supporting the greenback. Investors currently do not expect the ECB to be able to counter this to the same extent and therefore prefer the dollar because of the steady interest rate advantage.
ECB Council member Knot for significant rate hikes
Meanwhile, the Dutch member of the European Central Bank (ECB), Klaas Knot, has spoken out in favor of further sharp interest rate hikes in the fight against high inflation. At least two more “significant rate hikes” are needed, said the president of the Dutch central bank in Amsterdam. Knot also made it clear that the ECB would raise the key interest rate until medium-term inflation expectations had again reached the central bank’s target of two percent.
The ECB last raised the key interest rate sharply by 0.75 percentage points to 1.25 percent in September. For the upcoming interest rate meeting at the end of October, the market is once again expecting a rate hike of this magnitude. In September, the inflation rate in the common currency area was 10.0 percent.
Sentix indicator points to further contraction
According to the consulting firm Sentix, the economic mood in the euro area continues to deteriorate. The Sentix economic indicator fell by 6.5 points from September to October to minus 38.3 points. This is the lowest level since May 2020. Both the economic expectations and the assessment of the situation clouded over significantly. “The economy in the euro zone is still in the crash”, the experts from Sentix commented on the result.
Oil and gas prices fall
Oil prices started the week at a discount. In the early evening, a barrel (159 liters) of North Sea Brent costs 0.9 percent less. In the past week, prices had given the recent production cuts by the oil cartel OPEC+ noticeably increased.
Gas prices fall back
Meanwhile, the price of European natural gas continues to fall at a high level. At times, the much-noticed TTF futures contract for Dutch natural gas cost just EUR 144 per megawatt hour. That was about five percent less than on Friday. The situation on the gas market has been very tense for a long time recently improved. The background to this is the fact that European natural gas storage facilities are now well filled and political efforts are being made to curb natural gas consumption. In the morning, the gas price commission set up by the federal government presented its first proposals Energy cost containment submitted.
US chip values weighed down by China sanctions
In New York, chip values in particular are weak. The export restrictions imposed by the USA to China prohibit, among other things, the export of systems for the production of high-quality computer chips. Papers from Intel, Nvidia, Qualcomm, Micron Technology and AMD fell by up to four percent. “The measures will hamper China’s chip sector, thwart growth plans and potentially slow down innovation in both East and West,” warned analyst Danni Hewson of brokerage house AJ Bell.
Deutsche Post increases earnings forecast
In the early afternoon, Deutsche Post surprised with an increase in the earnings forecast, the share then jumped up sharply and is one of the biggest winners in the DAX. Despite the looming recession, the company expects more profits this year than before. Thanks to good business in the summer, the management will raise its forecast when the interim balance sheet is presented on November 8th, according to the group’s headquarters in Bonn.
So far, CEO Frank Appel is targeting an operating result (EBIT) of between 7.6 and 8.4 billion euros for 2022. According to preliminary figures, Swiss Post achieved an operating result of EUR 2.04 billion in the third quarter – more than analysts had expected on average and around 15 percent more than a year earlier.
BMW sees itself on course for 2022
BMW sold almost as many cars in the third quarter as in the same period last year. Chief Sales Officer Pieter Nota said BMW is on track to meet 2022 sales targets. In the third quarter, the Munich company sold 517,689 cars from its main brand, 1.4 percent less than in the same period last year.
In China, BMW’s largest market, sales of BMW and the small car brand Mini increased by 5.7 percent. In Europe, on the other hand, there was a significant drop of 11.1 percent. By the end of September, the carmaker had sold a total of 1.75 million cars including the Mini and Rolls Royce brands, down 9.5 percent year-on-year.
New interest in Vantage Towers?
The telecom groups American Tower Corp and Cellnex are apparently considering a stake in Vodafone’s radio tower subsidiary, Vantage Towers. Both the US operator of telecommunications infrastructure and the Spanish telecommunications provider are considering entering the bidding process, the Bloomberg news agency reported at the weekend. In September it became known that the British parent company would like to sell part of its approximately 82 percent stake in Vantage Towers. The MDAX company currently has a market capitalization of almost 12.9 billion euros.
Renault and Nissan talk about alliance
The closely interlinked car companies Renault and Nissan are examining the future of their recently rather fragile alliance. The two companies are in talks about strategic collaboration on markets, products and technologies, according to a joint statement released by Renault today. Nissan is considering investing in a new Renault electric car business.
Renault is currently considering making its electric car division independent of the group as a whole. With an investment by Nissan in this business, the interdependence between the French and Japanese would not necessarily increase: like the news agency Bloomberg citing people in the know, Renault is open to significantly reducing its own stake in Nissan.
Renault owns a 43 percent stake in Nissan. Nissan, for its part, owns 15 percent of Renault shares, as does the French state. According to the information, Nissan is said to have pushed for Renault to also reduce its stake to 15 percent of Nissan shares.