Dusseldorf On the day of the Fed’s interest rate decision, investors acted cautiously on the German stock market. In a long period of lack of momentum, however, the Dax has once again fallen below the psychologically important threshold of 14,000 points. The leading index closed down 0.5% at 13,971 points.
For a long time, the stock market barometer fluctuated around the previous day’s level with low selling. Only in the afternoon did the Dax continuously increase its losses. The closing level is also the lowest level in trading.
Overall, the course of the last few trading days allows us to conclude that the Dax is about to experience new momentum. On the one hand, the trading range in trading on Tuesday and Wednesday was very small at 160 and nearly 100 points.
On the other hand, seven of the past eight trading days have shown how nervous investors are right now. At this stage it happened that the Dax fluctuated considerably. However, the opening and closing prices of each session were close. So investors grabbed the weaker prices and sold in the rising market.
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Such multi-day stalemates are in many cases resolved with dynamic price action. So it could be that the major index is facing a strong momentum of movement.
The US Federal Reserve could be the reason for significant losses or gains in the market. The Fed is likely to raise interest rates more sharply on Wednesday night after the market closes than it has in over 20 years. According to corresponding signals from Fed chief Jerome Powell, investors in the financial markets are expecting an increase of half a percentage point. This would raise interest rates in the new 0.75 to 1% range.
Following the central bank governor’s press conference, expectations for further interest rate hikes, which have changed significantly in recent weeks, are crucial for the further development of equity markets. Almost all professionals currently believe in an increase in the following June of 1.5-1.75%. Four weeks ago, only 18% thought this scenario likely.
US interest rate between 3.00 and 3.25 percent at the end of 2022?
More than 50% of futures market professionals believe the US interest rate will be between 3.00 and 3.25% by the end of the year. At the beginning of April, only 6.5 percent supported this view. Therefore, any positive change in these expectations should at least raise stock prices on the other side of the Atlantic.
Even before the rate hike, Jim Cramer advised selective buying. The former hedge fund manager and host of CNBC’s Mad Money said, “This is my eighth round of tightening and I know from experience that if you wait for the Federal Reserve to move forward, it is too late to buy and inflation is over “.
According to Cramer, there are some industries “that need to recover if we are to find a sustainable recovery and a way out of this miserable period”. He cited real estate, finance, e-commerce and semiconductor chip companies as examples of stocks that have been hit hard despite their “fabulous” fundamentals. Those who can’t handle this turbulence should buy US government bonds, which yield around three percent.
According to an analysis by Bank of America, its investors invested $ 5.5 billion in US equity markets last week, the largest inflow since December 2020. BofA clients have been particularly active in individual stocks. Equity ETFs, on the other hand, saw only modest inflows.
According to the strategists, it was mainly institutional clients who bought, but hedge funds and private clients also took advantage. Investors bought stocks particularly in the technology and healthcare sectors.
Pessimistic private investors
Extremely negative investor sentiment also signals that the potential for surprises at the US Federal Reserve meeting is on the upside. If the interest rate decision has an effect, prices are more likely to rise than fall. With such a negative mood, most investors are not invested. Another sale seems unlikely because only a few can still sell.
Stephan Heibel, owner of analyst firm Animusx, took a closer look at the expectations of private investors for the future development of the Dax. With a value of minus 24, this is more pessimistic than ever. In the past 16 years that Animusx has interviewed investors, there have only been two times the expectation has been more pessimistic: once in May 2020 and then again in June 2020, both times in the midst of the corona pandemic.
At that time, the Dax rose about 14 percent over the next six months. Converted to today’s price level, prices would be just under 16,000 points.
To think about such prices, which appear unrealistic at the moment, the main German index must first sustainably overcome the downward trend since the beginning of January. The stock market barometer has failed twice in this effort. The descending line begins with the high of the year on January 5 at 16,285 points and is currently at 14,239 points.
Crossing this line is likely to continue to be a difficult undertaking. A first indication would be prices above the 50-day line, which is currently at 14,132 points and shows the medium-term trend.
According to the technical analysis, the area from 13,800 to 13,500 points is considered an important support on the underside. There is also last month’s low of the stock market with 13,566 points. Sustainable prices below 13,500 points are predestined for a new wave of sales.
The planned oil embargo drives prices up
The European Union proposes a “total ban on the import of all Russian oil”. This news pushes oil prices higher. Brent crude oil prices rose 3.5% to $ 108.40 a barrel. The price of US WTI oil rose 3.7% to $ 106.28 a barrel. The EU Commission wants to stop all imports of Russian crude with a transitional period of six months.
Food suppliers and downhill transportation service providers
A series of bad news resulted in heavy losses for food suppliers and transportation service providers. Lyft has warned of rising costs to attract drivers to the company. The share then broke at times by 35 percent, stronger than ever. It will be interesting to see if rival Uber also has to offer more incentives to drivers, wrote analyst Tom White of research firm DA Davidson.
According to Uber, there is no reason to do this. The company, which, like Lyft, also offers restaurant meals and groceries, also announced earnings ahead of market expectations for the current quarter. However, the stocks fell by nearly ten percent. US grocery vendors DoorDash and Grab were also unable to escape the attraction and slipped by up to ten percent.
In Europe, competitors Delivery Hero, Hellofresh, Deliveroo and Lieferando’s parent Just Eat Takeaway have come under selling pressure. Their documents have also gotten up to ten percent cheaper. At the Just Eat Takeaway, even a management crisis immediately before the general meeting hit the mood.
Look at the individual values
Fresenius: The Fresenius Medical and Hospital Group continues to struggle with the difficulties of its subsidiary Fresenius Medical Care (FMC). In the first quarter, the dialysis provider’s profits plummeted by nearly 40 percent, again due to the high costs and excessive mortality of its patients. This also overshadowed the start of the year for the mother. Fresenius’ share increased 3.1 percent, the FMC newspaper lost four percent.
VW: The group is confident that it will be able to cushion the more serious consequences of the war in Ukraine and the continued lack of chips this year. The Wolfsburg automaker therefore confirms its current annual forecast for sales and operating yields, which brought the share to less than 1.1%.
Team Viewer: The software house is reaping the benefits of the austerity measures introduced last year. The stock gained 8%. “We have taken firm action in all cost areas,” said outgoing CFO Stefan Gaiser. Expensive sponsorship deals in football and Formula 1 weighed on the edge of the Göppingen software house at the start of the year. The Russian business, which has since been discontinued, plays a subordinate role in Teamviewer.
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