market report
Investors remain cautious today after last Friday’s rally. Weak industrial data is spoiling sentiment, and hopes of the Fed cutting interest rates are also rather muted.
The DAX starts the new trading week with minimal losses at 15,950 points. The 16,000 points could therefore remain too high a hurdle for the time being. The leading German index closed on Friday with a plus of 1.4 percent to 15,961 points. Thomas Altmann, portfolio manager at QC Partners, does not rule out a record high in the foreseeable future, but at the same time points to the relatively pronounced “lack of movement” in the leading index.
The market observers at Helaba write in their daily comment that the environment is ambivalent. “Interest rate cuts are already expected, but much weaker economic data would be needed to justify this to this extent. The prospects for corporate profits would therefore cloud over,” write the experts. Against this background, it is questionable whether the DAX can immediately muster the strength to jump over the 16,000/16,011 point mark and head for the all-time high of 16,290.
Overall, the chances for price gains are not particularly pronounced at the moment: This week, the US consumer prices for April, which will be published on Wednesday, will be in the spotlight. Surprisingly strong US labor market data on Friday had already put a damper on hopes of a possible interest rate pause by the US Federal Reserve. A surprise in consumer prices would cast doubt on the chances of a possible rate cut from September.
The US banking crisis also remains an important topic. According to the Landesbank Baden-Württemberg (LBBW), the well-established stock exchange advice “Sell in May and go away”, i.e. withdraw from the stock market in May, could prove to be useful this year.
Today, attention was initially focused on German industry. Investors may not have liked the new production figures. Compared to the previous month, total production fell by 3.4 percent, the Federal Statistical Office announced. Analysts had expected a setback, but estimated it at only 1.5 percent. However, because production increased in January and February, there is clear growth for the entire first quarter compared to the final quarter of 2022.
“Another piece of bad news from German industry,” commented Elmar Völker, economist at LBBW. “After the figures for incoming orders had already hit the stomach of the German economy, the production figures followed suit. It is the third strongest minus in a monthly comparison in the last ten years – apart from the Corona slump. Today’s figures from the industry underline that the dangers of recession have by no means been averted,” says Völker.
Surprisingly strong quarterly figures from Apple supported Wall Street last Friday. The Dow Jones closed 1.7 percent higher at 33,674 points. The broader S&P 500 climbed 1.8 percent to 4,136 points. The index of the technology exchange Nasdaq gained 2.3 percent to 12,178 places.
For the Dow Jones, it was the largest percentage increase in one trading day since the beginning of January. In the week as a whole, the leading index lost 1.2 percent, the S&P lost 0.8 percent. The Nasdaq was largely unchanged from the previous week.
The Tokyo stock exchange reported back with losses from the holiday break today. The leading index Nikkei 225 fell by 0.7 percent to 28,949.88 points. Meanwhile, most other Asian indices went up at the start of the week, including the South Korean Kospi, which was also not traded recently.
Chinese stocks were particularly in demand at the beginning of the week. The CSI 300 index with the 300 most important values of the exchanges in Shenzhen and Shanghai climbed by around 1.2 percent to 4062 points. The Hong Kong Special Administrative Region’s Hang Seng index rose 1.1 percent to 20,262 points. The Australian leading index S&P ASX 200 rose by 0.8 percent to 7276 points.
Oil prices rose slightly at the beginning of the new week. In the morning, a barrel (159 liters) of North Sea Brent for delivery in July cost 75.71 US dollars. That was 41 cents more than before the weekend. The price of a barrel of American grade West Texas Intermediate (WTI) for June delivery rose by 44 cents to $71.78.
Oil prices have fluctuated sharply since the beginning of the year and have mostly fallen in recent weeks. Above all, the bleak economic prospects in many places are causing pessimism. The major interest rate hikes by the central banks to curb high inflation represent a significant burden. For this reason, too, a recession is expected for the world’s largest economy, the USA, this year.
The euro started the week with slight gains. In the morning, the common currency was trading at $1.1040, slightly higher than before the weekend. The European Central Bank (ECB) set the reference rate a little lower at $1.1014 on Friday afternoon.
The financial service provider Hypoport started the new year with a heavy drop in sales and earnings due to the slump in the real estate market. Sales fell by 31 percent to EUR 93.7 million in the first quarter compared to the same period last year. Earnings before interest and taxes (EBIT) amounted to EUR 0.8 million, after EUR 16.9 million in the same period of the previous year.
Late on Friday evening it became known that Vossloh shares in the SDAX were taking the place of Hochtief, which in turn was moving up to the MDAX. The index changes will take effect this Wednesday. Both changes had previously been expected by experts. Index changes are particularly important for funds that replicate indices in real terms (physically replicating ETFs). There then has to be reallocated and reweighted accordingly, which can have an impact on share prices
No changes are expected in the DAX for the next index review in June. In the two indices below, the MDAX and the SDAX, only a few places are likely to be swapped. Index expert Luca Thorißen from the investment bank Stifel Europe expects that the US telecom equipment supplier Adtran will have to leave the index of medium-sized stocks after the sharp price losses since April. According to him, the successor is the packaging specialist and bottling plant manufacturer Krones.
Evotec is also likely to be included in the MDax again and would then push the real estate group Aroundtown into the SDAX. Evotec will initially be removed from the index by Deutsche Börse this evening because the drug manufacturer failed to publish its certified annual report on time following a cyber attack. According to Evotec, the report is now expected for mid-May, which would enable a return to the MDAX in June.
While Adtran and Krones are likely to swap places, Aroundtown is likely to push its competitor Dic Asset’s share out of the SDAX. But it is also possible that Dic Asset could still save itself and that Basler, a manufacturer of industrial cameras, would have to leave the SDAX, said Thorißen. Deutsche Börse will announce any changes on Monday, June 5th. They come into force on Monday, June 19.