market report
Status: 07.10.2022 18:07
After a turbulent week of trading, the DAX fell deep into the red on Friday after strong US jobs data. Wall Street is also losing. On a weekly basis, however, the balance sheet is reasonably pleasing.
The DAX closed down 1.6 percent to 12,273 points. The leading German index was therefore unable to defend its level after a brilliant start to the week, which carried it to 12,667 points. At the beginning of the week, investors were still speculating that the US Federal Reserve could slow down the pace of interest rate hikes. A pause in interest rates would have made investments in the stock market more attractive again and ensured future purchases.
Strong US jobs data today raised reasonable doubts about this optimistic notion. That is why the recent upward trend in the DAX came to an abrupt end at the end of the week. Thanks to the strong run on Monday and Tuesday, there is still an increase of more than one percent on a weekly basis.
Strong US jobs data
In the United States, nonfarm payrolls growth in September beat market expectations, up 263k. Hourly wages rose 5.0 percent year-on-year after rising 5.2 percent in August. The US unemployment rate has surprisingly fallen from 3.7 to 3.5 percent.
“For the Fed and investors, the robust labor market data are more a curse than a blessing. They do confirm that the US economy grew again in the third quarter and that the economy is unlikely to crash at the end of the year,” comments Johannes Mayr, chief economist at Eyb & Wallwitz. “At the same time, they dampen hopes that the Fed could reduce the pace of tightening before the end of the year,” said the expert.
Wall Street falls far behind
Wall Street also recorded significant losses: the Dow Jones lost 1.6 percent to 29,430 points. The broader S&P 500 is even weaker, falling 1.9 percent to 3673 points.
“With this jobs report, it seems clear that we are on track for another significant rate hike by the Fed, with the market pricing in a 75 basis point hike in interest rates at its next meeting,” said Paul Craig, portfolio manager at Quilter Investors.
This assessment is supported by statements by the head of the New York Federal Reserve District, John Williams: “We have to keep raising interest rates.” Williams underscored that inflation, at 8.3 percent, was “far too high”.
euros under pressure
On the foreign exchange market, the euro against the dollar also reacted to the US data with exchange rate losses. The European common currency is currently trading at $0.9778. Over the course of the week, the euro had initially approached dollar parity again before the world’s leading currency showed strength again in the face of increasing risk aversion among investors.
Oil price rises sharply
Oil prices, on the other hand, continued to rise at the end of the week. A barrel (159 liters) of North Sea Brent rose by more than three percent. In the past week, oil prices have risen, one of the decisive factors was one Significant reduction in production due to the OPEC+ oil alliance.
Energy crisis hits Landesbanken and Commerzbank
According to the rating agency Moody’s, banks have to prepare for increasing problems in their loan books due to rising energy prices. In Germany, Commerzbank, Bayerische Landesbank (BayernLB), Landesbank Hessen-Thüringen (Helaba) and Landesbank Baden-Württemberg (LBBW) were hit harder than average, according to a report by Moody’s. The proportion of loans to energy and utility companies is above the EU average for the four German financial institutions.
In addition, the financing of commercial real estate exposes German institutes to the secondary effects of the energy crisis. In addition to the commercial real estate financier Aareal Bank based in Wiesbaden, the loan books of BayernLB, Helaba, LBBW, as well as those of DZ Bank, Hamburg Commercial Bank and DekaBank also show a significant proportion of commercial real estate, which is above the EU average.
Commerzbank sees itself exposed to potential risks of EUR 45 billion from corporate customers who are affected by volatile energy prices. That corresponds to 9.3 percent of the bank’s total portfolio.
End of the chip boom heralded
Negative impulses for the stock markets came from the technology sector at the end of the week: After the PC and electronics boom in the corona pandemic, consumers tightened their belts due to inflation and thus brought the golden times in the chip industry to an abrupt end.
The world’s largest manufacturer of memory chips and smartphones, Samsung, reported an unexpectedly strong decline in its operating profit in the past quarter. At the same time, the US chip manufacturer AMD warned of a significantly weaker sales development. Technology stocks are therefore under pressure worldwide.
Adidas dumping rapper Kanye West?
In the DAX, the Adidas share is one of the biggest losers. The sporting goods manufacturer makes its Partnership with US rapper Kanye West in question. West had accused Adidas of copying the design of the “Yeezy” shoes he designed. The products produced in cooperation with West’s label “Yeezy” have always been very profitable for Adidas, said a broker.
Cannabis stocks asked after Biden push
Beyond the major indices, the Synbiotic share stands out positively with a percentage increase in double digits. Papers from Tilray Brands are by far the most active value on the Tradegate trading platform, and Aurora Cannabis is also increasing massively with brisk trading. The background to the strong price gains in cannabis stocks is a push by US President Joe Biden to decriminalize the possession of marijuana in the USA.
Biden instructed the Departments of Justice and Health by presidential decree to expedite review of the classification of cannabis. Biden emphasized that marijuana is currently equated with heroin and classified as more dangerous than the synthetic drug fentanyl. “That makes no sense,” he criticized on Twitter.
Credit Suisse buys back bonds
The crisis-ridden Swiss bank Credit Suisse has announced that it will buy back debt securities. She wants to spend three billion francs on it, as she announced today. The rating agency S&P stated “increasing risks” at the bank on Thursday evening. After billions in losses, Credit Suisse is undergoing a comprehensive restructuring. However, she only wants to announce details when the figures for the third quarter are presented on October 27th.
EnBW buys even more liquid gas from the USA
The energy supplier EnBW has increased its planned liquefied gas purchases from the USA and increased the purchase volume announced in June this year by the company Venture Global LNG from Arlington in the US state of Virginia by 0.5 million tons per year. This means that EnBW will purchase two million tons of LNG per year from the US company from 2026. The supply contracts have a term of 20 years.
Musk’s Twitter takeover process halted
Following Elon Musk’s surprise new commitment to buying Twitter is the court proceedings surrounding the takeover have been halted for the time being. Judge Kathleen McCormick made the decision yesterday. However, McCormick placed the pause in the proceedings under clear conditions: If Musk has not completed the roughly $44 billion takeover of the short message service by October 28, the parties to the dispute must prepare for a new trial in November.