Status: 06/13/2022 07:37
After Friday’s price drop – the biggest daily loss in three months – the DAX is likely to start the new week with big discounts. The market is fearful of major interest rate hikes by central banks.
Anyone who had hoped for a countermovement after the DAX’s recent price drop is disappointed. The leading German index is likely to start the new trading day with significant losses. The broker IG estimates that the 40 German standard values are 1.6% lower at 13,545 points.
What now speaks against DAX stocks
On Friday, the DAX fell 3.1% to 13,762 points, making it the largest daily loss in three months. With the slide under the important supports at 14,000 and 13,850 points, the technical picture in the DAX is noticeably blurred. Against this backdrop, further price losses are not surprising. Especially since the fundamental factors currently speaking against stocks remain in place.
It was the prospect of a prolonged series of strong interest rate hikes by the Fed that prompted investors to leave global equity markets at the end of the week. The European Central Bank’s (ECB) surprisingly tight interest rate program had already fueled DAX investor fears of a significant economic slowdown in Germany.
Fed before further steep rate hikes?
A surprise 8.6% rise in US inflation in May caused investors to flee equity markets en masse at the end of the week. “It is becoming increasingly clear that the central bank initiated its monetary policy shift too late,” said Commerzbank economist Christoph Balz. “The time for large rate hikes of 50 basis points is far from over.”
“Inflation hasn’t peaked, it’s not even stagnant. It’s still accelerating and is likely to do so in June,” Aneta Markowska of Jefferies investment bank said in a statement today. “The inflation data is a game changer, forcing the Fed to shift into higher gear and accelerate monetary tightening.”
Wall Street with heavy losses
The US Dow Jones Index closed 2.7% lower on Friday at 31,392 points. The high-tech Nasdaq fell 3.5% to 11,340 points. The large S&P 500 lost 2.9% to 3900 points.
Government bonds also flew out of deposits. This pushed the yield on historic 10-year T-Bonds to 3.717 percent at times. The two-year title returned 3.038 percent, its high 14 years ago.
Bond yields on the rise
In Europe, euro government bond yields had also risen sharply at the weekend. The 10-year federal bond hit an eight-year high at 1.47%. The risk premium (spread) of Italian bonds vis-à-vis their German counterparts has risen to the highest of the last two years.
In view of the more rapid turnaround in interest rates in Europe and the US, investors are re-evaluating risks in equity markets. Rising bond yields make stocks less attractive than bonds.
Slippery price in the Nikkei
Earlier in the week, global growth concerns didn’t let investors in Asia go either. Mass tests announced in Beijing’s more populous Chaoyang district ahead of a new corona outbreak are also fueling fears of a new blockade in China. Japan’s Nikkei fell 3.0% just before the Tokyo close. The Shanghai Stock Exchange is down 1.0%.
The euro falls below $ 1.05
The safe haven US dollar remains in demand on the currency markets. In turn, the single European currency continues to weaken and slips below $ 1.05. In the morning, a low of $ 1.0476 was paid for one euro, the lowest price since mid-May. This means that the exchange losses of the euro since the middle of last week have been around 3 cents. An ounce of gold costs $ 1,863, down 0.8 percent from the previous day.
Oil prices are falling
The price of oil fell at the start of the new week. Traders cited the strong dollar and gloomy krona situation in China as a reason. In the morning, a barrel (159 liters) of North Sea Brent cost $ 120.26. It was $ 1.75 cheaper than on Friday. The price of a West Texas Intermediate (WTI) grade barrel fell from $ 1.82 to $ 118.85.
Bitcoin as cheap as it has been since December 2020
The global flight of investors from risk is also reflected in the cryptocurrency markets. At the beginning of the week, the price of Bitcoin temporarily dropped below the $ 25,000 mark and then to its lowest level since December 2020. The price of the digital currency was hovering around $ 30,000 for weeks.
Rheinmetall: Six Marder infantry combat vehicles ready
According to the Rheinmetall armaments group, it has completed the modernization of the first armored personnel carriers of the Marder type. Six vehicles are already “ready,” a company spokesperson said. Ukraine wants Germany to have heavier weapons so that it can better equip itself to defend itself against Russia. Rheinmetall had offered to deliver the martens which had been decommissioned by the Bundeswehr and needed to be reprocessed.
Qatar has involved Total in the new liquid gas project
Qatar has awarded the French energy group Totalenergies a 25% stake in a new liquefied natural gas project with which the Arab country intends to significantly increase its capacity to export liquefied natural gas (LNG). The volume of liquid gas exports is expected to increase from 77 to 110 million tons per year by 2027.
Tesla announces stock split
With US electric car maker Tesla, another large US company announced a stock split to make its shares cheaper for small investors. Tech billionaire Elon Musk’s company announced Friday after the US market closed that its board of directors would accept a three-for-one split if shareholders approved it at the next annual general meeting.