Dusseldorf On the German stock market, the new trading week starts as the previous one ended: with high losses. The Dax slipped 2.5% or the equivalent of 340 points in the afternoon and is quoted at 13,423 points. The daily minimum is 13,386 points.
From Wednesday to Friday last week, downward momentum has steadily increased and the stock market barometer closed at a daily low on each of these three days. On Friday, the Dax closed at 13,762 points.
For Thomas Altmann of investment house QC Partner, investors are “experiencing a stock market reassessment in view of ever-rising interest rate expectations.” Rising interest rates have a direct impact on corporate profits and are becoming increasingly competitive for stocks.
With these price losses of the last few days, all the important resistances that the Dax had to overcome on the rise is over. On the downside, the focus is on last month’s May low at 13,380 points. Since the low in May, the Dax has started a four-week rally that peaked at 14,709 points in early June.
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The area around 13,500 points is very relevant for the further development of the German stock market. Lists sustained below this mark should therefore bring back the psychologically important score of 13,000 points and the year’s low of 12,834 points.
According to investor sentiment, a countermovement is likely
Investor sentiment offers a different perspective on these price losses. Because according to current data from Handelsblatt’s Dax-Sentiment survey, the sell-off was followed by the usual extremely violent slump in sentiment. Which means: many investors have already sold. Since the survey began in the fall of 2014, there has always been a countermovement with a two to four percent increase in the two weeks following such a collapse.
But no stock market rule is without exception: in March 2020, in the midst of the collapse of the Corona, a 12 percent crash in the Dax followed a week with less than three percent and then another less than 20 percent. But is the current situation comparable to the Corona crash?
For sentiment expert Stephan Heibel, “it was often a good idea to accept fear and panic.” If a countermovement occurs, you can always judge later whether the fear is justified and, if necessary, go out again.
Inflation and interest rates remain perennial problems
At least since last trading week, it should be clear: inflation and rising interest rates will obviously remain a long-standing problem on the stock exchange. The main focus is on steadily rising oil prices and higher government bond yields.
The price for a barrel (159 liters) of North Sea Brent could drop below the $ 120 mark this Monday, but the forecasts are rather bleak. Goldman Sachs commodities analysts believe $ 140 likely in the further course of the year, Swiss commodities trader Trafigura as high as $ 150. This would mean that the price of oil would overshadow its level at the start of the war in Ukraine. At that time, the price briefly jumped to $ 139.
Bond yields also remain at high levels. A US government bond with a ten-year maturity is falling 3.155%, the German counterpart continues to climb 1.55% on Monday. A look at two-year government bond yields, which react particularly intensively to changes in monetary policy, shows how much the situation has changed in the bond market.
The yield on a two-year US Treasury bond is now 3.25 percent, the highest since 2007. Earlier this year, that figure was 0.77 percent. At 1.07 percent, two-year Bunds are currently producing the highest rate since 2011. That was the only year in which the European Central Bank (ECB) tightened interest rates twice in the wake. of the financial crisis. If oil prices and yields continue to rise, it would be another drag on stock prices.
Negative signals are also coming from the forex market. The euro has fallen nearly 2% against the dollar since ECB President Christine Lagarde announced rate hikes on Thursday. Normally, rising interest rates cause a currency to appreciate because it offers a higher yield.
But the European common currency slid to its lowest level in nearly a month at $ 1.0474. This is not a good sign for stock markets, as capital is flowing out despite rising interest rates. According to a Financial Times (FT) report, a recession is currently the consensus scenario for the US. The US bond market is also demonstrating this. Two-year government bonds are yielding 3.25 percent there, as much as they were the last 14 and a half years ago and more than their ten-year counterparts. These yield at 3.155 percent.
This phenomenon, known as the inverted yield curve, last appeared about two months ago. It is seen as a sign of an impending recession. Investors fear that the US Federal Reserve will shut down the economy with drastic interest rate hikes. The market also gradually expects a recession for the euro area.
Investors sell Turkish bonds
The ongoing economic crisis in Turkey feeds fears of a government default. Hedging of a $ 10 million package of Turkish bonds against default has risen by $ 12,000 to a record $ 837,000, data provider Markit said. This means that these credit default swaps (CDS) have more than doubled in one year. For comparison: for the default of a comparable federal bond, the total sum is only 12,400 euros.
At the same time, investors are eliminating the country’s bonds from their portfolios. This brings the yield on dollar bonds maturing in 2034 to an all-time high of 10.3%.
Bitcoin drops below $ 25,000
Bitcoin fell below the $ 25,000 mark for the first time since December 2020. The oldest cyber currency slipped to $ 23,633 at its peak. For Ethereum, things are going even more clearly downhill. The cryptocurrency is temporarily trading around 22% lower at $ 1,302. This is the lowest level since December 2021. The additional selling pressure was the announcement by cryptocurrency lending platform Celsius Networks that it would suspend all payments and transfers between accounts “due to extreme market conditions”.
Look at the individual values
Values of steel: Shares of steel fell more than the market as a whole. The titles of Thyssen-Krupp, Salzgitter and Klöckner & Co. lose up to six and a half percent. In addition to general economic concerns, traders have signaled the risk of strikes in the steel industry.
BASF: CEO Martin Brudermüller warns of the drastic consequences of a gas embargo for the chemical company. “If we are no longer assigned gas, we have a few hours to close the Ludwigshafen site,” said the manager of the “Süddeutsche Zeitung”. “Then the huge site would stand still for the first time in its history.” BASF shares lost 0.6%.
Rhine metal: The share gained 1.2%. Many of the manufacturer’s armored personnel carrier “Marder” that have been decommissioned by the Bundeswehr but are currently being modernized are ready for use and could be delivered to Ukraine immediately. When and where the “marders” are delivered is the federal government’s decision.
Biotechnology: The U.S. Food and Drug Administration has confirmed the safety and efficacy of the corona vaccine for children between the ages of six months and four years. According to an initial analysis, the efficacy of the vaccine in this age group is 80.3%. The US-based stock fell 1.1% on the German trading platform Xetra.
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