market report
The hunt for records in the leading German index is over for the time being. Investors remain cautious due to Fed Chairman Powell’s appearance before the US Congress and the upcoming ECB interest rate meeting.
After seven trading days with new records in a row, the winning streak in the DAX has broken. Investors are also taking cover today in anticipation of US Federal Reserve Chairman Jerome Powell’s congressional hearings starting tomorrow. “The German stock index is taking a well-deserved break,” said Jochen Stanzel from CMC Markets. A sharp setback in prices is already overdue. Short-term downward movements are part of every bull market.
After the DAX closed 0.1 percent lower yesterday, minimal losses will follow today. The leading German index started trading with a loss of 0.2 percent, recovered somewhat over the course of the day and was still down 0.1 percent to 17,698 points at lunchtime. On Friday, the stock market barometer increased the annual increase to a good six percent with its record high of 17,816 points.
“The overarching picture remains constructive,” say the Helaba experts. Portfolio manager Thomas Altmann from QC Partners speaks of a dwindling willingness to buy, but also does not see any profit-taking “on a larger scale” or increased hedging activities in the DAX.
Because the accounting season in the USA is almost over, the focus on the market is now increasingly shifting to monetary policy. With the US labor market report and appearances by Fed Chairman Powell before the US Congress, important dates are coming up in the coming days.
Powell is likely to reiterate in his speech that he is in no hurry to lower key interest rates, emphasized CMC analyst Stanzl. Investors were currently expecting a first interest rate cut in June. “If Powell intervenes tomorrow, it could provide the impetus for a correction in the current bull market.”
The interest rate decision by the European Central Bank (ECB) is also on the agenda on Thursday, with another interest rate break expected. However, investors are hoping for indications as to when the monetary authorities led by President Christine Lagarde will initiate the interest rate turnaround.
Declining inflationary pressure was signaled today by the further falling manufacturer prices in the euro area. Producer prices in industry fell by 8.6 percent compared to the same month last year, according to the Eurostat statistics office. At the beginning of last year, double-digit percentage increases were the order of the day. The ECB’s target of an inflation rate of 2.0 percent is increasingly within reach.
Another reason for the reluctance on the German stock market is the weakening international stock markets. Wall Street paid tribute to its strong run yesterday. In the USA, there are internal party primaries in more than a dozen states on Super Tuesday in the presidential election campaign, which is likely to once again lead to a wait-and-see attitude on the stock markets.
The government in China was unable to impress investors with its growth targets. At the start of the National People’s Congress today, Beijing announced that it would once again aim for economic growth of around five percent this year, as in the previous year. Investors’ hopes for a large economic stimulus package were not fulfilled. The stock markets in Asia closed mixedly.
The euro has not continued the gains of the past two trading days for the time being. In the morning, the common currency was trading at 1.0851 US dollars, slightly lower than the previous evening. The euro was slowed down by a generally somewhat gloomy mood on the financial markets, after the US stock exchanges had recently failed to reach further highs.
Oil prices have continued to fall. After the weak start to the week, prices only fell comparatively slightly in early trading. Most recently, a barrel (159 liters) of North Sea Brent cost 82.46 US dollars for delivery in May. That was 34 cents less than the day before. The price for a barrel of American West Texas Intermediate (WTI) for April delivery fell 41 cents to $78.33.
The development of demand became more important on the raw material markets. This morning, at the start of the People’s Congress in Beijing, China’s government once again announced economic growth of around five percent for the current year. However, the world’s second largest economy has also set ambitious goals for reducing energy demand. China is one of the world’s important oil importers.
The price of gold has continued its rise with speculation that interest rates will fall. In the morning, one troy ounce (31.1 grams) was trading at $2,123 on the London Stock Exchange. The price is just below the record high reached in December at $2,135. Calculated in euros, however, it was enough for the gold price to reach an all-time high. In the morning, 1,957 euros were paid for a troy ounce of the precious metal, which is more than ever before.
In the evening, Deutsche Börse will decide on the future DAX composition. Promotion candidate Lufthansa could have a difficult time in the race for a place in the first stock market league, as possible relegation Zalando made up ground in terms of share price in February.
Production at Tesla’s only European car factory comes to a standstill after a power outage. A possible arson attack on a nearby high-voltage pylon has paralyzed the Gigafactory in Grünheide. A fire in a power pole led to a power outage, a spokeswoman for the US electric car manufacturer confirmed. The plant was evacuated. The police say they are investigating possible arson.
A strategy update today did not provide the relief investors had hoped for for Bayer shares. After the price was halved in ten months, the shares of the DAX group temporarily lost three percent to a good 27 euros at midday and fell to a low for almost 20 years. The last time the shares were worth so little was in mid-2005. Although the agricultural chemicals and pharmaceutical company’s operating result exceeded the average analyst estimates last year, this was also due to one-off effects, explained analyst Richard Vosser from JPMorgan Bank.
In addition, there will be no split of the group for the time being. Instead, Bayer is specifying its savings goals in connection with streamlining management. Due to impairments, Bayer slipped deep into the loss zone in its Crop Science 2023 division. With falling sales, there was a loss of 2.9 billion euros. In the previous year, Leverkusen had made a profit of 4.15 billion euros.
In the important Chinese sales market, more and more smartphone users are turning their backs on Apple and turning to local competing products. In the first six weeks of 2024, sales of iPhones in the People’s Republic fell by 24 percent year-on-year, the research house Counterpoint announced today. At the same time, Apple’s main Chinese rival Huawei increased its sales by 64 percent.
With its own trading platform for cryptocurrencies, Deutsche Börse wants to compete with top dogs like Binance or Coinbase. The German stock exchange operator today introduced the Deutsche Börse Digital Exchange (DBDX), which is fully regulated. In addition to trading, the offer also includes the processing of these transactions as well as the custody of Bitcoin, Ethereum & Co. “We want to offer institutional customers in Europe trustworthy markets for crypto assets that are characterized by transparency and security,” said the head of foreign exchange and cryptocurrency Carlo Kölzer.
With the start of the European digital law DMA, Google will present results from special search engines in more detail in the EU. This involves, for example, comparison portals for flights, hotels or shopping offers, as the Internet company explained in a blog entry. However, some of its own functions “that help consumers find companies (directly)” have been removed. The Alphabet subsidiary cites its flight search as an example of this.
In the collective bargaining dispute at Postbank, ver.di is increasing the pressure with renewed warning strikes. The union called on branch and call center employees nationwide to go on two-day strikes starting this Wednesday (March 6). “We assume that the majority of the branches will remain closed on both days and that there will also be major problems with accessibility on the service hotlines,” said negotiator Jan Duscheck. Ver.di is demanding 15.5 percent more money for around 12,000 employees in the Deutsche Bank Group with a Postbank collective agreement, but at least an increase in salaries of 600 euros.
After strong year-end business, the VW commercial vehicle subsidiary Traton is entering the new year with unexpectedly high goals. Management is aiming for a range of minus 5 to plus 10 percent for sales and revenue compared to the previous year. The board headed by boss Christian Levin expects the operating profit margin adjusted for special effects to be between 8.0 and 9.0 percent. Analysts have so far had values at the lower end of the range for both values.
The automotive and industrial supplier Schaeffler made less profit last year due to the planned Vitesco takeover. Despite the increasing daily business, the net profit attributable to shareholders was almost half as high as in the previous year at 310 million euros, as the SDAX company announced. In addition to higher interest rates, the valuation of the Vitesco shares tendered from the takeover offer had a negative impact, and there were also high costs, especially for energy hedging transactions.
The outdoor advertising specialist Ströer wants to carry the momentum from strong Christmas business into the new year. In 2024, organic sales growth in the group is likely to be significantly above the previous year’s figure of 7.5 percent, said co-chief executive Christian Schmalzl. Adjusted for exchange rate effects and takeovers, revenue from the core outdoor advertising business is expected to increase by up to 15 percent in the first quarter. Ströer also locates its digital outdoor advertising in this segment: According to the company, the sub-area increased by a third at the end of 2023.
The online pharmacy Redcare Pharmacy made the operational leap into profitability in 2023 and is on track for a record thanks to its growing customer base. With sales increasing by almost 50 percent to 1.8 billion euros, the adjusted operating result (Ebitda) reached 53.5 million euros after a loss of eight million in the previous year. “We have achieved all of our ambitious goals and also made significant progress in expanding our platform infrastructure,” explained company boss Olaf Heinrich. At the end of 2023, the active customer base was a record 10.8 million. Shares in the MDAX temporarily gained more than seven percent.
The US semiconductor company Advanced Micro Devices apparently cannot export its AI processor, which was specially developed for the Chinese market, to the People’s Republic. AMD tried to get the green light from the US Department of Commerce to sell the artificial intelligence (AI) chip to China, the Bloomberg News agency reported. The chip has lower performance than those AMD sells outside of China and was specifically designed to comply with US export restrictions. However, the processor is still too powerful, the report quoted US government officials as saying.
The US aviation regulator FAA has found problems in quality control during investigations into Boeing production following a near miss. The FAA announced yesterday that there were violations of regulations, among other things, in the monitoring of production, the handling of components and product control. The authority is taking a close look at both Boeing and fuselage supplier Spirit Aerosystems.