market report
After the record rally, the leading German index could take a break this week to breathe. The likelihood of a market correction is likely to increase.
On the first trading day of the shortened week after Easter, the leading German index could take a breather today after its eight-day winning streak. According to calculations by banks and brokers, the DAX is likely to start the trading week with small losses. But not everyone sees it that way: The broker IG estimates the DAX to be 0.1 percent higher at 18,511 points at the start of trading in the morning.
On Maundy Thursday, the DAX added another high to its recent record series during trading – and closed only slightly changed. In the end, the leading German index gained 0.08 percent to 18,493 points. The leading German index closed the month of March with a gain of 4.6 percent and the first quarter with an increase of 10.4 percent.
The prospect of lower key interest rates from the European Central Bank and the continued robust US economy have caused the DAX to rush from record high to record high in recent weeks. Above the mark of 18,500 points that has now been reached, the air becomes thinner and the probability of a correction increases.
“Such a clearing storm would not be unusual. Corrections in a bull market produce the strongest price drops. However, unlike a bear market, they do not set the direction, are limited in time and then the upward trend continues again. There are no signs of such a correction “But that’s the nature of things. Often there isn’t even a need for a reason for prices to fall,” says analyst Jochen Stanzl from CMC Markets.
The market experts at DZ Bank consider the DAX to be overheated from a technical perspective due to its unusual upward momentum over the past few days. Analyst Stephen Schneider points out that the most important German stock market barometer has already increased by over 30 percent since its low point last fall. The DAX price has now taken on a structure that is reminiscent of a parabola, which is why there could now be a timely break. However, there are no signs of an end to the overall upward trend, said Schneider.
However, the analysts at Landesbank Baden-Württemberg (LBBW) advise caution given the recent all-time highs. The record rally is taking place against the background of a less dynamic German economy and faltering profit performance of local companies. “The stock markets seem to have run ahead of fundamental developments. We therefore think it is time to take a breath,” recommend the LBBW experts.
Trading on the US stock exchanges took place again yesterday, Easter Monday. On Wall Street, investors’ hope that the US Federal Reserve (Fed) would soon cut interest rates was fading. The Dow Jones index of standard stocks closed 0.7 percent lower at 39,539 points. The broad S&P 500 lost 0.3 percent to 5,239 jobs. The technology-heavy Nasdaq was barely changed at 16,371 points.
According to stockbrokers, unexpected growth in US industry dampened expectations that the Fed would soon significantly reduce interest rates. The purchasing managers’ index rose by 2.5 points to 50.3 points in March, as the Institute for Supply Management (ISM) announced. This means that for the first time since September 2022, the barometer, which is closely followed on the financial markets, is above the 50 mark, above which it indicates growth.
The Asian stock markets have also been mixed due to dwindling hopes of imminent interest rate cuts in the USA. Japan’s investors remain cautious. The Nikkei index, which includes 225 values, stood still at 39,810 points. The broader Topix index fell 0.1 percent to 2,719 points. The Shanghai stock exchange was up 0.2 percent. The index of major companies in Shanghai and Shenzhen lost 0.1 percent.
In China’s real estate crisis, trading in securities from the ailing Country Garden company has been stopped on the Hong Kong stock exchange. The company announced this today at the start of trading. The once largest residential builder in China in terms of sales figures had previously announced that it would have to postpone the publication of its balance sheet for 2023. In doing so, Country Garden violated a rule on the Hong Kong stock exchange, which now had consequences on the trading floor after the Easter holidays.
Last Thursday, Country Garden justified the postponement by saying it needed to collect more information. The indebted group missed a payment to creditors abroad last year. A financier has now applied to a Hong Kong court to break up the company. The first hearing is scheduled to begin in mid-May.
The German cloud provider Ionos has received a major order from the federal administration to build a particularly strictly secured computer cloud solution. The company announced this today in Karlsruhe. An upper limit of 410 million euros was mentioned in the tender for the framework contract.
The “private enterprise cloud”, which was certified by the Federal Office for Information Security (BSI), among others, is to be operated in the data centers of the Federal Information Technology Center. The special thing about the solution from the United Internet subsidiary is that this platform is not connected to the public Internet. This uses a concept known as “air gapping”. This makes it almost impossible for outsiders to access sensitive information.