Frankfurt The German stock index (Dax) fell below the 13,000 mark again on Thursday and closed below the important mark. The main index closed with a fall of 1.7% to 12,918 points. After a brief rally at midday, the stock market barometer fell again over the course of the year. MDax for German midsize companies even closed 2.7% in the red.
Over the course of the day, price movements spread more and more. Financials have been notably weak, Deutsche Bank, for example, falling more than 12%. Banks have long been considered the winners of the rise in yields. On Thursday, however, capital market interest rates fell significantly, which called into question this positive effect.
Also in red were stocks such as those of chemical specialist Brenntag or Mercedes, while some stocks, including utility stocks, but also Adidas, for example, entered the green zone. The breakdown makes it clear that investors are primarily concerned about the economy. This is also supported by the weakness of MDax.
The latest figures raise concerns for the economy: the purchasing managers’ index for the euro area economy fell unexpectedly by 2.9 points to 51.9 points, the lowest level in the last 16 months. The purchasing managers’ index for the German private sector fell 2.4 to 51.3 points, the lowest in six months.
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In the US, the most important indices are up, contrary to previous signals. Federal Reserve (Fed) Chairman Jerome Powell speaks to the House Financial Services Committee on Thursday. Investors follow his words with great enthusiasm.
Powell had already spoken before the Senate on Wednesday and was relatively pessimistic about economic development. At the same time, he has left no doubt that the Fed intends to fully focus on fighting inflation in the near future and does not rule out larger interest rate hikes by one percentage point.
More dangerous recession than inflation?
At first glance, the most surprising reaction was a sharp rise in government bond prices, which in turn meant a decline in yields. The 10-year US government bond yield was 3.109%. German 10-year bonds also increased significantly, the yield was only 1.44%.
Jim Reid of Deutsche Bank tried to explain what happened. A brief summary of his remarks can be expressed as follows: Due to the growing inflation risk, doubts are raised that the Fed can actually sustain a tough course of interest rate hikes, as this is severely weakening the economy. .
At the same time, as far as the markets can tell, inflation expectations have slightly decreased. Overall, this leads to slightly lower yield expectations, which in turn pushes bond prices higher.
An important debate in the United States, but one that is likely to have implications for markets around the world, concerns commodity prices. The significantly higher overall level, especially for oil, could mean that companies need to revise their earnings forecasts downward in view of higher costs.
On the other hand, energy prices have recently declined slightly, which could mitigate the upward pressure on prices. Independent US analyst Ed Yardeni even draws the vague hope from falling prices for the important industrial copper metal that inflation may have passed its peak.
Overall, the result from this perspective is that recession is taking precedence over inflation as a problem and this tends to lighten the load on the bond market. At the same time, this development is negatively impacting stocks that are more dependent on the economy and, in turn, could ease some of the pressure from high-value tech stocks that have been weak so far.
Look at the individual values
Around the city: After a downgrade by JP Morgan from “neutral” to “underweight”, the real estate group’s papers fell about 6.6% on Thursday.
Beiersdorf: With an increase of around 1.5 percent, the Hamburg-based brand company is one of the biggest winners. The group re-entered the index earlier in the week.
BASF: At under more than 4.5 percent, the chemical giant is one of the biggest losers in the Dax. BASF is particularly affected by the loss of gas supplies from Russia and will likely have to cut production in some areas. The stock subsequently recovered slightly and other stocks overtook it on the way down.
Here you can go to the page with the Dax course, here you can find the current highs and flops in the Dax.