market report
As of: 01/27/2023 6:20 p.m
Despite the ongoing US reporting season, the DAX remained in a sideways trend today. Investors are waiting for fresh stimulus from the US Federal Reserve next week.
The spark is still missing on the German stock market. As was the case throughout the week, the DAX moved in a narrow trading range just above the 15,000 point mark and recorded a small plus of 0.8 percent in a weekly comparison. At the end of today’s trading day, the scoreboard showed a slight gain of 0.11 percent to 15,150 points. The daily and weekly high was 15,186 points, the low was 15,077 points.
Things went better today for the stocks from the second row, the industry and export-heavy MDAX gained almost one percent to 29,075 points. In a weekly comparison, the index climbed by 2.1 percent.
“The enthusiasm at the beginning of the year seems to have given way to caution,” said market observer Michael Hewson of broker CMC Markets. He spoke of a pause on the European stock exchanges compared to the US stock exchanges, which had caught up a bit this week.
So far, relatively little inspiration has come from the current US reporting season, where positive and negative surprises alternate again today. “Investors are unsettled,” explains IG analyst Christian Henke. “On the one hand, mixed quarterly reports and announced layoffs are fueling fears of recession, on the other hand, the US economy is showing no weaknesses and is growing despite all the adversities.”
Yesterday, US GDP for the fourth quarter surprisingly exceeded market and analyst expectations with growth of 2.9 percent.
Central banks back in focus
The US Federal Reserve (Fed), which in all likelihood will continue its interest rate cycle with a further interest rate hike of 25 basis points, could smash the knot in the coming week (once again). At least that’s what the market expects. However, the bank’s outlook in the fight against inflation is likely to be more important than the interest rate hike that has already been agreed.
“It’s easy to imagine Fed President Jerome Powell telling stock market investors quite clearly that their expectations of interest rate cuts starting in the fall will not be met.” That could stall the stock market rally sparked by the fall in inflation, says portfolio manager Thomas Altmann from asset manager QC Partners. Conversely, an indication that monetary tightening is about to end could bring some relief.
Unlike the European Central Bank (ECB), whose cycle is still in full swing, as recently emphasized by bank boss Christine Lagarde. On February 22, the Governing Council of the ECB will meet in the Finnish capital Helsinki, and a further interest rate hike of 50 basis points is expected.
Nasdaq is building strength
As in the last few days, the technology exchange Nasdaq is particularly in focus on Wall Street. The Composite index is up around 0.8 percent, while the Dow Jones index is up just 0.1 percent. Meanwhile, corporate reporting season continues.
Intel is going under the wheels
Among the individual values, the focus is on the Intel paper that after very weak quarterly figures fell by more than ten percent on the eve of the opening, but has now narrowed its losses somewhat. But the stock remains at the end of the Dow.
The record slump in PC sales weighed heavily on Intel sales and was significantly stronger than expected. For the current first quarter, the group forecast adjusted earnings of 24 cents per share instead of the previously expected a loss of 15 cents. Intel CEO Pat Gelsinger said he expects one of the largest inventory write-downs the industry has ever seen.
Amex in high demand
The counterpart to Intel are the papers of the credit card giant American Express, which rose by more than ten percent and led the leading index. Despite higher loan provisions in the quarter, investors particularly like the financial group’s optimistic outlook. CEO Stephen Squeri dampened economic worries after the presentation of the balance sheet: “We don’t see any signs of recession,” he told the US portal “Yahoo Finance”. That’s exactly what you want to hear in the stock market.
Visa increases profits and revenues strongly
The credit card giant Visa continues to make excellent earnings despite high inflation and fears of recession. In the first fiscal quarter (ending December), revenues increased 12 percent year-on-year to $7.9 billion. Net income climbed 6 percent to $4.2 billion. Visa shares climb around 2.4 percent.
Euro still below 1.09 dollars
At the end of the week, the euro fell back below the $1.09 mark. In the late afternoon, 1.0863 dollars are paid for one euro. The euro was recently driven by the expectation of further major ECB rate hikes. The European Central Bank set the reference rate at 1.0865 (Thursday: 1.0895) dollars. A troy ounce of gold is trading little changed at $1930.
US earnings and consumer spending as expected
US consumer incomes rose in December. According to the Department of Commerce in Washington, household income increased by 0.2 percent compared to the previous month. Consumer spending, on the other hand, fell by 0.2 percent. Both had been expected by economists.
As expected, inflation slowed again. However, it remained well above the US Federal Reserve’s inflation target of two percent. The PCE price index, which is based on consumer spending, rose by 5.0 percent year-on-year. In November, the rate was still 5.5 percent. Month-on-month, consumer prices rose 0.1 percent.
Oil prices are turning negative
In the afternoon, a barrel (159 liters) of North Sea Brent for delivery in March cost 86.82 US dollars. That was 67 cents less than the day before. The price of a barrel of the American grade West Texas Intermediate (WTI) fell by 90 cents to $80.11. Oil prices were weighed down by a rise in the dollar exchange rate. The US consumer climate at the University of Michigan, which rose more than expected, supported the dollar in the afternoon. A higher dollar makes crude oil more expensive for buyers from other currency areas.
The week just ended was quiet in the crude oil market. There are hopes on the oil market in China’s less strict corona course. After turning away from the extremely strict pandemic precautions, the focus is on an economic revival with increasing energy consumption. This supports oil prices.
According to Commerzbank, the Opec+ oil production cartel will stick to its production policy. The ministerial monitoring committee will meet next Wednesday. According to Commerzbank, it should recommend that the expanded production cartel stick to the agreed production volume, even though countries such as Nigeria and Angola are significantly below their production targets.
Sartorius after downgrade at the end of the DAX
The biggest DAX loser was the preference share of the Göttingen laboratory supplier Sartorius. The experts at the private bank Berenberg have downgraded the title from “Buy” to “Hold”. The papers of the French subsidiary Sartorius Stedim Biotech offer a better risk-reward ratio for valuation reasons. The investors cashed in after the profits of the previous days, it was said on the floor.
Ver.di calls again for warning strikes at the post office
The service union ver.di is increasing the pressure in the collective bargaining dispute with the post office with further warning strikes. For today, ver.di is calling on employees in selected companies in the parcel and letter centers as well as in parcel, letter and group delivery to all-day work stoppages.
Airbus is looking for 13,000 new employees
Airbus plans to hire 13,000 new employees worldwide this year, including around 7,000 to newly created jobs. The new employees were to support the planned expansion of jet production and be deployed in the armaments, aerospace and helicopter divisions.
On the stock exchange, however, Airbus held the red lantern in the DAX together with Sartorius. The analysts at Jefferies see the expected annual forecasts as a brake on the share for the aircraft manufacturer, which is why they downgraded their rating to “Hold” from “Buy”.
Lufthansa signs a declaration of intent to enter Italy
Lufthansa and the Italian Ministry of Finance have signed a letter of intent for the German group to take a stake in Ita Airways. This brings Lufthansa closer to the planned takeover of the Alitalia successor.
The declaration initiates exclusive negotiations between the state as the current sole owner of Ita and the Frankfurt-based company, as the ministry announced. Further details will not be published, as it was also said. Lufthansa initially wants to take over a minority stake in the airline with the aim of eventually owning the entire Ita.
Price range for Ionos shares is fixed
The internet and telecom group United Internet and the financial investor Warburg Pincus have set the price range for the planned IPO of their hosting subsidiary Ionos. Up to a total of 17.3 percent of the shares in Ionos are to be offered for a unit price of 18.50 to 22.50 euros.
H&M with severe profit slump
H&M slips into the red at the end of the year. Rising production costs and energy prices as well as the withdrawal from Russia have ruined the balance sheet of the Swedish textile giant H&M. The company reported a 68 percent drop in net profit for the full year 2022 to 3.6 billion crowns (a good 321 million euros).
LVMH share at record high after record year
The luxury goods group LVMH managed a record year in 2022. Sales and profit increased by double digits. Among the group’s many brands, Louis Vuitton stood out positively with annual sales of over 20 billion euros. The LVMH share then marked a new record high on the Paris Stock Exchange. With a stock market value of around 406 billion euros, LVMH is by far the most valuable company in the euro zone.
Bed Bath & Beyond faces bankruptcy
Troubled US furniture store Bed Bath & Beyond has defaulted on a loan repayment. Bed Bath & Beyond is now examining all strategic alternatives, including bankruptcy.