market report
Status: 26.10.2022 09:49 a.m
Pleasing quarterly reports supported the DAX at the start of trading. After closing above the 13,000 hurdle yesterday, it has now managed to stay above it.
At the start of trading, the DAX was just above the round mark of 13,000 points, but remained stable. Supported by a strong Wall Street, the leading German index cracked this hurdle yesterday for the first time since mid-September. In addition to the continued good indications from overseas, the mood on the German stock market should also remain positive in view of the predominantly better than expected quarterly reports from domestic companies.
The German stock exchange barometer started almost unchanged. In the first few minutes of trading, the DAX moves towards the 13,100 point mark. The previous day it had closed close to its daily high, continuing its positive run so far this week. Above all, the declining yields on the bond market proved to be a price driver. In addition, the DAX followed the US stock exchanges, which were boosted by the predominantly robust corporate balance sheets and the hope of less drastic interest rate hikes by the Federal Reserve (Fed).
“The fact that the after-hours price losses at Microsoft and Alphabet are not affecting the overall market is a good sign,” said market expert Jochen Stanzl from broker CMC Markets. The expectations for the third quarter have probably been reduced sufficiently so that negative surprises are likely to be priced in.
CMC Markets analyst Michael Hewson emphasized that the figures for the US technology heavyweights presented the evening before the US stock market closed were mixed, with the Google parent in particular disappointing. Alphabet felt the effects of advertisers’ frugality in the past quarter, resulting in only a modest increase in revenue and a decline in profit. Alphabet shares fell by around 6 percent in after-hours trading.
Microsoft was able to significantly increase its revenues in the summer, despite increasing concerns about inflation and the economy worldwide. At the same time, however, the computer giant is suffering from the strong dollar, which is reducing foreign earnings in US currency. The net result fell and the Microsoft paper lost around two percent in after-hours trading in an initial reaction. However, the modest figures should not have too strong an impact on the European markets, said Hewson, referring to the high price gains on the Asian trading centers in the morning.
Hopes that the major central banks would slow down the pace of interest rate hikes created a buying mood on Asia’s stock markets today. In Tokyo, the Nikkei index, which comprises 225 stocks, closed 0.7 percent higher at 27,431.84 points, and prices in Shanghai and Hong Kong also rose. Shane Oliver, chief strategist at investment firm AMP Capital, said stock market traders expected the Federal Reserve to slow down its pace of interest rate hikes once it took another big step next week. However, the prices have recently fallen very sharply, which could motivate one or the other investor to get started.
The euro initially moved little today and was thus able to maintain the strong price gains of the previous day. In the morning, the shared currency was trading at $0.9956, only slightly lower from the previous evening. Yesterday, unexpectedly weak US economic data gave the euro a boost and the price rose about a cent in a short period of time. In the USA, house prices developed weaker than expected in August. This fueled speculation in the market that the US Federal Reserve would be less likely to fight high inflation with interest rate hikes in the future, which weighed on the dollar and in turn boosted the euro.
Oil prices fell today after a surge in US oil reserves. A barrel (159 liters) of North Sea Brent cost US$ 92.72 in the morning. That was 80 cents less than the day before. The price of a barrel of West Texas Intermediate (WTI) fell 53 cents to $84.79. The previous evening it was announced that the interest group American Petroleum Institute (API) had recorded an increase in crude oil inventories by 4.5 million barrels in the past week. An increase in US oil reserves usually weighs on oil prices.
US data and reporting season at a glance
In addition, the focus today is once again on economic data from the USA. After home prices and consumer sentiment, marketers are now awaiting building permits and home sales, which analysts say will drop to 585,000 from 685,000 in the previous month. Investors are hoping the Fed will hike rates at a slower pace as data starts to point towards a slowdown in the economy.
In the US, the balance sheets of Apple and Facebook parent Meta are expected in the evening. In Germany, too, the reporting season is shifting up a gear today. From the DAX alone, Deutsche Bank, BASF, Mercedes-Benz, Symrise and Puma SE presented quarterly figures in the morning.
Despite the deteriorating economic situation, Deutsche Bank surprisingly achieved a profit in the billions in the third quarter. CEO Christian Sewing therefore sees the institute as “right on track” to achieve its goals for the current year. Traders praised the strong numbers while calling those from asset management subsidiary DWS weak.
The chemical giant BASF wants to quickly cut costs after a slump in profits in the third quarter. The group must “adapt the cost structures as quickly as possible and also permanently,” affirmed BASF boss Martin Brudermüller. The reason is the deteriorating earnings trend in Europe and Germany and the rising energy prices. BASF had already published the savings program in mid-October together with preliminary figures for the third quarter.
With sharply increased sales, Mercedes-Benz increased its operating profit by leaps and bounds in the third quarter. From July to September, the group earned 5.2 billion euros before interest and taxes – that was 83 percent more than in the same period last year, when the lack of chips slowed deliveries, as the carmaker announced today. Sales increased by 19 percent to 37.7 billion euros. The brand with the star increased car deliveries by more than a third to around 530,000 vehicles in the summer. Above all, the China business boosted the sales figures.
Good business with additives for pet food and cosmetics makes Symrise even more optimistic for the current year. The manufacturer of fragrances and flavors has raised its forecast for organic growth – i.e. excluding acquisitions and currency effects – to over ten percent for 2022, after increasing it to more than seven percent in the summer. In the first nine months, the DAX group achieved organic sales growth of 11.3 percent, and 13.6 percent in the third quarter.
The Franconian sporting goods group Puma remains on a record course despite the economic slowdown. Adjusted for exchange rate effects, sales in the third quarter increased by 17 percent to 2.35 billion euros, the number three on the world market announced today. Earnings before interest and taxes (EBIT) improved by 13 percent to EUR 258 million. It was “the best quarter in Puma’s history,” said CEO Björn Gulden. “For the fourth quarter, we expect market volatility to continue, but remain confident of achieving our full-year guidance.”
Electronics retailer Ceconomy performed better than expected in the last quarter, beating its sales forecast for the past fiscal year. Revenues in the fourth quarter (as of the end of September) rose by 1.3 percent to a good 5.2 billion euros, as the company announced today. The growth was supported by marketing campaigns, it was said. In the 2021/22 financial year, sales increased by 1.9 percent to 21.8 billion euros. Ceconomy had previously forecast stagnation. The electronics retailer with the two chains MediaMarkt and Saturn lowered its targets at the end of July due to meager consumer sentiment and high inflation.
The music streaming market leader Spotify does not see any weakening in the influx of subscription customers even in times of inflation and economic concerns. In the last quarter, the number of paying users increased from 188 to 195 million within three months – and thus a little more than the company had expected. By the end of the year, Spotify plans to have 202 million subscribers. Spotify revenue rose 21 percent year over year to just over $3 billion in the third quarter. The bottom line was a profit of $22 million compared to $160 million in the same quarter last year. Spotify shares temporarily lost around five percent in after-hours trading yesterday.
At the largest German gas importer Uniper, losses are increasing due to the rise in gas prices. A clearly negative result is expected for the third quarter, as Uniper surprisingly announced yesterday evening. The group has had to buy more expensive gas on the market for months because of the Russian delivery restrictions in order to be able to continue to meet its contractual obligations. The losses also affect Uniper’s balance sheet equity. The company therefore announced the loss of more than half of the share capital.
Elon Musk apparently wants to complete the takeover of the online network Twitter by the court-imposed deadline on Friday. The Tesla boss assured this during a video conference with bankers who are helping to finance the $ 44 billion deal, the news agency reported Bloomberg citing insiders. The banks, which are to provide $ 13 billion in loans, only have to settle the final formalities before the money is released for Musk. The tech billionaire himself and Twitter initially did not comment.
The Americans’ desire to travel and shop makes the tills ring at the credit card provider Visa. Transactions processed at the world’s largest payment processor increased 12 percent on a constant dollar basis to $50.9 billion in the fourth quarter (ended September 30), the company said. On a constant dollar basis, payment volume increased 10 percent, with non-US volume up 36 percent.
The major Spanish bank Santander earned a little more in the third quarter thanks to the significantly tighter monetary policy of the most important central banks and rising interest rates. The bank, which is listed in the EuroStoxx 50, announced today that the surplus had increased by three percent to 2.42 billion euros. The main reason for this was the increase in interest income by around five percent to just over ten billion euros. This more than compensated for the rising costs resulting from high inflation.
The major Italian bank Unicredit has raised its earnings forecast after a jump in profits. The profit shot up in the third quarter by almost 62 percent to 1.7 billion euros, as the HVB mother announced today. The bank benefited from higher interest rates and lower-than-expected loan defaults. In addition, savings efforts and the restructuring of the past few years have paid off, explained Unicredit and spoke of the best quarter for at least a decade.