After last week’s price drop: DAX starts a new stabilization attempt

market report

Status: 20/06/2022 09:57

After its recent drop of 1700 points at the start of trading, the DAX can catch up. But current price gains in the major German index should be treated with caution.

Earlier in the week, there is another attempt at stabilization in the DAX. At the start of trading on XETRA, the 40 German standard shares rose by 0.6% to 13,208 points. The DAX may initially rise slightly from the three-month low of 13,008 points the previous week. Since Whit Monday, the leading German index had lost 1,700 points at its peak.

Major DAX brands in the foreground

The focus of technically oriented investors is now on the recovery trend from the low of March 2020 (currently at 13,202 points). Should the DAX regain this important support at the end of the day, the technical picture would improve a bit.

Friday’s daily high of 13,237 points is also significant for the further course of trading: a jump above this would help the ongoing upward move to gain new momentum. Should the recovery rally fail, however, investors should be prepared for a return to the low of the year since the beginning of March at 12,439 points.

Fears of gas, interest rates and inflation are rampant

Meanwhile, the fundamental outlook for equities remains more than bleak. The scenario of a stop to the Russian gas supply is becoming more and more probable. In this case, experts fear an immediate recession in Germany.

Furthermore, high inflation rates and central banks’ reaction to them pose a serious threat to the global economy and corporate profits. Markets see the latest interest rate hikes by the Fed, SNB and Bank of England as a Warning sign: More and more central banks seem to fear losing control over the loss of inflation expectations after even hesitating for a long time to identify high inflation rates as a lasting problem.

Producer prices are rising at record rates

A look at the producer prices released today shows that inflation rates have not yet peaked. These increased by an average of 33.6% in May. “This was the highest increase over the same month last year since the survey began in 1949,” the Federal Statistical Office said.

This means that commercial producer prices have seen new record increases every month since December 2021. Producer prices are seen as an important precursor to the development of consumer prices.

Economic worries push Nikkei into the red

Fears of a global economic recession weighed on Asian stock exchanges earlier in the week. At the close of trading in Tokyo, the Nikkei index, which includes 225 values, was 0.7% lower at 25,771 points. The Shanghai stock exchange, on the other hand, grew by 0.1%.

Good guidance from Nasdaq

Inconsistent specifications for today’s trading day come from Wall Street. On Friday, investors only partially returned to US exchanges. The Dow Jones Standards Index closed down 0.1 percent at 29,888 points. The tech-rich Nasdaq, on the other hand, advanced 1.4% to 10,798 points. The broad S&P 500 gained 0.2% to 3674 points.

“The markets will not calm down until there is a sense that the actions of the Fed and other central banks will be successful not only to curb inflation but also to try to prevent a global recession,” said Kenny Polcari, managing partner of the consulting firm Kace Capitale.

The price of oil remains at a low level

Meanwhile, the breeze for equity markets comes from falling oil prices. A barrel (159 liters) of North Sea Brent cost $ 113.07 at the start of the trade. It was five cents less than on Friday. The price of a US West Texas Intermediate (WTI) grade barrel also fell slightly to $ 109.42.

At the end of the week, persistent fears of an investor recession caused the price of oil to drop sharply. Brent lost up to 5.7%, WTI fell 6.7% at the most.

Bitcoin drops below $ 18,000 at times

Sentiment in the cryptocurrency market remains shaky. Earlier in the week, Bitcoin fell as much as 5.1% to $ 19,586. Over the weekend, the oldest and most well-known cyber currency dropped to its lowest level since December 2020 at $ 17,588.

For comparison: around $ 68,000 was paid for a bitcoin in November. “The breakout of $ 20,000 shows that confidence in the cryptocurrency industry has collapsed,” said OANDA market analyst Edward Moya.

Gold is a little more expensive again

The euro could continue to stabilize above the $ 1.05 mark. The single European currency is currently trading at $ 1.0524. The dollar, also trading slightly weaker than other major currencies, is benefiting the price of gold. The price of one troy ounce of the yellow precious metal rose by 0.2 percent to $ 1,843 in the morning.

Delivery Hero must leave the DAX for Beiersdorf

Just a few months after being withdrawn from the DAX, consumer goods manufacturer Beiersdorf is now returning to the top league of the stock exchange. In return, the Delivery Hero food delivery service has been relegated to MDAX. Wind and solar farm operator Encavis, previously listed on the SDAX, will also be included in the MDAX, swapping places with financial services provider Hypoport.

PNE Wind for the first time in the SDAX

In addition to Hypoport, the armaments company Hensoldt and the special pharmaceutical company Medios are now again represented in the SDAX, as well as for the first time the developer of wind farm projects PNE. The laser expert LPKF, the wind turbine manufacturer Nordex and the carbon fiber specialist SGL are to be eliminated.

New risks for glyphosate for Bayer in the US?

The US Environmental Protection Agency was ordered by an appeals court to review the health risks of glyphosate. The court questioned the EPA’s assessment that the active ingredient in Bayer’s controversial Roundup herbicide poses no particular risk to humans. Bayer is facing numerous US lawsuits in the United States over alleged cancer risks from glyphosate.

The head of the RWE calls for the reactivation of the coal-fired power plants

DAX-listed RWE energy group head Markus Krebber has advocated a temporary reactivation of coal-fired power plants to save costly and scarce natural gas. “In the electricity sector, other coal-fired power plants should be in operation instead of gas plants as soon as possible,” Krebber told Süddeutsche Zeitung.

Airbus: talks with Qatar Airways in the paint dispute

Airbus wants to settle the dispute with its client Qatar Airways in negotiations. “There is progress in the sense that we communicate and work together,” said Airbus chief Guillaume Faury in Doha. The aircraft manufacturer and the airline have been fighting in court for months. These are paint and surface damage on long-range jets of the Airbus A350 type.

Pfizer takes a stake in vaccine developer Valneva

US pharmaceutical company Pfizer is investing in vaccine developer Valneva. For 90.5 million euros, Pfizer acquires a good 8% stake in the Franco-Austrian biotechnology company through a capital increase. Valneva intends to use the proceeds from the equity investment to fund its Lyme disease vaccine, which is expected to enter the third and final phase of clinical development in the third quarter of this year.

Use before corona vaccinations for young children begin

After an advisory committee from the U.S. Food and Drug Administration (FDA), the CDC also came out in favor of using coronavirus vaccines in children between the ages of six months and five. Both the vaccine from manufacturers BioNTech and Pfizer and Moderna’s preparation could be used for around 18 million young children. According to the US government, it could start as early as tomorrow.

Easyjet cancels multiple flights

Low-cost airline Easyjet is canceling additional flights due to severe staff shortages at airports and on board. The capacity offered in the current quarter will amount to 87% of the pre-crisis level of 2019 and in the summer quarter, the high travel season, to 90%, as announced by Easyjet. So far, 90 percent was forecast for this quarter and 97 percent for the next quarter.

Does Credit Suisse have a problem with the oligarch?

Credit Suisse faces new multi-million dollar lawsuit. As the “Sonntagszeitung” writes, the Russian-born oligarch Vitaly Malkin is asking the big Swiss bank for 500 million francs. Credit Suisse rejects the allegations.

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