Price crash in the DAX: Investors flee equities

market report

Status: 04/25/2022 09:39

The DAX experienced heavy price losses at the start of trading. Concerns over interest rates and the economy are driving investors out of equities and into supposedly “safe havens”. Gold is not one of them.

The DAX started the new trading week with a sharp drop in price. At the start of trading on XETRA, the leading German index slipped 1.7% to 13,908 points. Concerns about interest rates and growth weigh on prices. Several investors fear that the US Federal Reserve could stifle both the global economy and markets with rapid interest rate hikes.

Fed Chairman Jerome Powell said last week that he will raise interest rates by 50 basis points at the next Federal Reserve meeting in early May. Apparently, this caught some market participants off guard. Powell’s statements came as no surprise, as investors should have been discounting the interest rate hike a long time ago.

DAX with sell signal

With the slide below its two most recent all-time lows at around 14,000 points, the DAX sends a technical sell signal. The general downward trend since the beginning of January is still intact. From their recovery peak of 14,925 points at the end of March, the German standard values ​​have already lost around 1000 points.

“As long as the DAX does not sustainably rise above the 14,500-point resistance zone, further long-term price declines can be expected,” said Christian Zoller, charting technology expert at ING.

All eyes on the ifo

As trading progresses, investors are likely to focus on the ifo business climate index. In view of the numerous economic burdens such as the war in Ukraine or the stringent Chinese crown measures, a new slowdown is expected. In March, sentiment collapsed over the Russian attack on Ukraine.

“Prices are exploding and are a drag on consumers and businesses if they can’t pass on the higher costs,” says Dekabank. “At the same time we are seeing the first signs of non-delivery due to the war and sanctions.”

Update economy from 04/25/2022

Klaus-Rainer Jackisch, Human Resources, tagesschau24 9am, April 25, 2022

Black Monday in the DAX?

Against this backdrop, the DAX appears to want to follow a well-known pricing pattern: a first wave of selling on Friday is often followed by a second one after the weekend. The fault lies primarily with private investors, who – inflamed and shocked by media reports – panic and sell. From a statistical point of view, there is only a good chance of a new upside on Tuesday.

In the past there have often been such price drops on the stock exchange, which started with a “Panic Friday”, continued with a “Black Monday” and finally ended on a “Turnaround Tuesday”.

Nikkei with falling prices

Negative indications for the German stock market come from foreign exchanges. Asian equity markets fell the hardest in two weeks this morning. The Nikkei index, which includes 225 stocks, fell 1.9% to 26,591 points at the close in Tokyo. The Shanghai Stock Exchange is even in the red for 4.7%.

Heavy losses to the Dow and Nasdaq

The prospect of significant rate hikes by the US Federal Reserve prompted investors to pull out of Wall Street on Friday. The Dow Jones lost 2.8% to 33,811 points. The high-tech Nasdaq fell 2.6% to 12,839 points and the broad S&P 500 fell 2.8% to 4,272 points.

The price of US oil falls below $ 100

Fear of a global economic slowdown also prompted investors to avoid risky investments like oil earlier in the week. Another negative factor is the lockdown in Shanghai, which is also holding back oil demand.

The price of a barrel of North Sea Brent fell 3.1% to $ 103.34 in early trading. The price of a barrel of the US WTI variety fell 3.2% to $ 98.84.

Investors flee to the “safe haven”

More and more investors seek safety in the “safe haven” of the world’s leading currency, the US dollar. The dollar index, which tracks rates against major currencies, rose 0.3 percent to a two-year high of 101.34 points. The expected series of US interest rate hikes and fears of a recession are currently the dominant themes in the currency market, says Candace Browning, chief analyst at Bank of America.

Meanwhile, the euro has only briefly benefited from Macron’s victory in the French presidential election. The upcoming hikes in US interest rates have quickly returned to the focus of currency market investors. The euro fell 0.8 percent to $ 1.0717.

Gold continues to slide towards $ 1900

Meanwhile, “safe haven” gold is not in demand by investors. The price of one troy ounce of the yellow precious metal fell by 1.0% to $ 1913. The price of gold is suffering from the rise in the US dollar and rising bond yields. Gold itself produces no interest and is therefore a “natural loser” of expectations about rising interest rates.

Support for Bayer management from Norway

Bayer’s management led by CEO Werner Baumann can count on the support of the Norwegian sovereign wealth fund in the debate on the resignation of the board of directors at next Friday’s annual general meeting. The fifth largest shareholder, with just under 2.3% of Bayer shares, announced on Sunday that he will vote for the discharge of the Board of Directors. The fund, on the other hand, does not want to support the remuneration package for Baumann.

Possible tank deal for Ukraine leads Rheinmetall

Rheinmetall is pushing a possible sale of 100 “Marder” infantry fighting vehicles to Ukraine. The actions of the armaments group go against the trend. According to a newspaper article, the company has applied to the federal government for the delivery of the devices. However, Switzerland prohibits the transfer of ammunition manufactured there for the “Marder”.

MAN restarts truck production

After six weeks of stoppage, the truck manufacturer MAN is resuming production today. The supply of harnesses has improved and a small part of the workforce can now gradually return from the reduced work, said MAN boss Alexander Vlaskamp. “According to current estimates, we could lose more than 20 percent of our annual production. It is difficult to make up for the backlog,” said Vlaskamp.

Twitter deal with Musk later this week?

Apparently, Twitter is no longer at odds with tech billionaire Elon Musk’s takeover bid as it was in the beginning. The parties are negotiating and could conclude a deal as early as this week, Bloomberg news agency reported, citing people familiar with the matter. The Wall Street Journal had already mentioned it.

Covid tests give Roche another boost at the start of the year

The corona pandemic gave pharmaceutical company Roche another favorable wind in the first quarter of 2022. Consistently high demand for corona tests in the Diagnostics division ensured further sales increases. At the same time, revenues from the pharmaceutical sector increased. Prospects for the whole year confirmed.

Supply bottlenecks and provisions add to Philips

Dutch medical technology group Philips continues to struggle with supply chain problems. Higher costs, as well as additional provisions for retirement and replacement of some fans, resulted in a larger loss in the first quarter. The continuing operations deficit increased from EUR 34 million to EUR 152 million in the same period of the previous year.

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