market report
According to the latest US inflation data, investors have to abandon their hopes of a first interest rate cut by the US Federal Reserve in May. You can also see this clearly in the DAX.
Investors’ hopes for a rapid interest rate turnaround by the US Federal Reserve have fallen noticeably since yesterday. Investors had already all but written off the first interest rate cut in March following dovish tones from Fed Chairman Jerome Powell. Now they also doubt that there will be any easing in May, as US inflation remains stubbornly high.
Against this background, the DAX is adding to its price losses from yesterday. At the opening of trading on XETRA, the German standard values were trading at 16,873 points. The day before, the DAX had slipped by 0.9 percent to 16,881 points.
The liberating chart technical breakthrough, a sustained breakout above the 17,000 point mark, is still a long time coming. The risk of correction has increased significantly. The areas at 16,800 and 16,600 points now represent the next holding zones.
Rising yields make life difficult for stocks
“Now it remains to be seen whether the US inflation shock will only cause short-term uncertainty on the stock markets or whether it will end the rally,” wrote Thomas Altmann from asset manager QC Partners.
“In view of the recent uncertainty, the yield on ten-year US government bonds has risen again,” emphasizes IG analyst Christian Henke. “And as we all know, the stock markets don’t like rising interest rates. Fixed-interest securities then become increasingly attractive.”
The latest US inflation data fueled market concerns that the US Federal Reserve’s hoped-for monetary policy reversal could be a long time coming. “This is likely to displease the Fed. Expectations of interest rate cuts will be pushed aside,” warned Helaba economist Ulrich Wortberg.
In fact, according to CME Group’s Fed Watch Tool, the probability of an initial rate cut at the Fed’s May meeting is now just 37.5 percent. For comparison: 52.2 percent of market participants had expected this before the data was published.
The inflation data was a bitter pill for investors, who then dropped stocks like hot potatoes, said market expert Stephen Innes from asset manager SPI Asset Management.
The Dow Jones index of standard stocks closed yesterday 1.4 percent weaker at 38,272 points. The broader S&P 500 also lost 1.4 percent to 4,953 points, slipping back below the highly regarded 5,000 point mark. The Nasdaq technology exchange index fell 1.8 percent to 15,656 positions.
In the wake of Wall Street, the stock market in Japan fell in the middle of the week. The Nikkei index lost 0.7 percent to 37,703 points, the broader Topix index fell 1.1 percent. Shares in Hong Kong were up around one percent on their first day of trading after the Chinese New Year holiday. Mainland Chinese stock exchanges will remain closed until the end of the week.
On the foreign exchange market, the lower expectations of interest rate cuts have massively strengthened the dollar. In the middle of the week, the euro was trading at $1.0705, roughly at the previous day’s level.
The strengthening dollar and the changed interest rate outlook are currently weighing heavily on the price of gold, which slipped below the $2,000 mark yesterday. In the morning, 1,991 dollars are paid for a troy ounce of gold.
After the increase of the past few days, oil remains in demand in the middle of the week. A barrel (159 liters) of North Sea Brent for delivery in April costs $82.94 this morning – that’s an increase of 0.2 percent. However, the increased inventories, which the interest group American Petroleum Institute reported the evening before, are weighing on the mood on the market. The official inventory data from the US government is expected in the afternoon.
BASF shares are among the biggest DAX winners in early trading. According to a trader, the chemical company is benefiting from an upgrade of the shares to “Buy” from previously “Hold” by the major French bank Société Générale. Analyst Peter Clark sees negative news now priced into the price. He expects the new CEO Markus Kamieth, who will take over in April, to take a more radical approach to turn things around.
The arms sector is still on the rise. Rheinmetall shares are continuing their record rally and climbing to a fresh all-time high in early trading today. Hensoldt shares remain in high demand in the MDAX, and newcomer Renk is also continuing to rise. Investors are hoping for rising defense spending.
According to a report by Handelsblatt, there is new evidence of the use of forced labor as part of the Volkswagen Group’s activities in Xinjiang, China. Uighur forced laborers may have been involved in the construction of a test track in the northwestern Chinese province, the newspaper reported, citing studies by Xinjiang researcher Adrian Zenz.
After 15 years, the Munich technology group Siemens is now also given a better grade by the rating agency S&P. The long-term issuer rating is expected to rise to “AA-” from “A+” – the fourth-best grade on the rating agency’s 23-point scale. S&P is honoring the successful restructuring of Siemens’ industrial divisions.
The television group ProSiebenSat.1 ended the past year somewhat better than expected due to one-off effects. The adjusted operating result (EBITDA) fell by 15 percent to 578 million euros in 2023, as the operator of channels such as ProSieben, Sat.1 and Kabel 1 announced in the evening. However, ProSiebenSat.1 recently only expected 550 million.
The shareholders of the world’s largest travel group TUI have cleared the way for the withdrawal from the London Stock Exchange and a possible return to the German average value index MDAX. At the virtual general meeting yesterday, shareholders voted with 98.35 percent of the votes cast in favor of the planned departure from the London Stock Exchange on June 24th. “We would expect that we would then be included in the MDAX in June,” said CFO Mathias Kiep.
The battery company Varta has shut down its IT systems and production following a hacker attack. The SDAX company announced in the evening shortly before the stock market closed in Ellwangen that no information could currently be given about the extent of the effects. It is also still unclear whether any damage was actually caused. Normal operations should be restored “as quickly as possible,” it said.
The industrial service provider Bilfinger wants to become even more profitable this year with increasing revenues. The Ebita margin is expected to rise from 4.3 percent to 4.9 to 5.2 percent. A savings program should also contribute to this. The bottom line in 2023 was a profit of 181 million euros after 28 million euros in the previous year. The shareholders should also benefit from this: the dividend should increase by 38 percent to 1.80 euros.
Facebook founder Mark Zuckerberg took a hard line against Apple’s new computer glasses. Zuckerberg said in a video on the company’s own platform Instagram that he tried out the Apple Vision Pro. Even before that, he expected that the Quest 3 VR glasses from his meta group, which are seven times cheaper, would offer the better price-performance ratio for most people. But after the test he even thinks “that the Quest is the better product, period.”
The electronics and entertainment group Sony benefited from brisk demand in its games and networks division in its important Christmas quarter. However, business with the PS5 games console was worse than expected. For the entire financial year (until the end of March), the Japanese group is therefore expecting slightly less revenue than before: the target is now 12.3 trillion yen (76.3 billion euros).
Encouraged by surprisingly strong business, AirBnB has delivered an optimistic outlook. Thanks to a continuing boom in international travel and long-term stays, the accommodation provider announced sales of between $2.03 and $2.07 billion for the current quarter the previous evening. The shares then rose by almost nine percent in after-hours US trading.
A typo in the business forecast has given Uber rival Lyft’s shares an extraordinary roller coaster ride. The price initially shot up by more than 60 percent in after-hours trading on Tuesday – and then fell sharply after the outlook was corrected. The ride-hailing company had initially promised an improvement in the profit margin in the current year by 500 basis points (i.e. five percentage points) – but the number contained one zero too many.