Unstable investors: DAX struggles against relegation

market report

Status: 05/06/2022 12:44

On the last trading day of the week, investors experience another turbulent trading day. After the Fed’s interest rate hike, they are now speculating on the future course of the ECB.

The DAX lost around 1% to 13,750 points around midday. It has even dropped below the 13,700 mark at times, but the DAX is currently moving away from its daily lows again. The main German index closed yesterday with a -0.5 percent at 13,902.52 points. Over the course of the day, it had gained nearly 2.5% at its peak and climbed above the 14,300 point mark.

Economy update 06.05.2022

Bettina Seidl, Human Resources, tagesschau24 09:00, 6.5.2022

The rally was just a flash in the pan

“Yesterday’s turnaround shows that investors continue to have no confidence in a stable bottom in the equity market,” commented Jochen Stanzl, chief market analyst at CMC Markets. “The brief rally after the US interest rate decision turned out to be a flash in the pan,” agree ING Bank experts, who argue technically. As long as the DAX is below 14,000 points on the daily chart, further price decline can be expected in the near term.

Technical chart considerations aside, the fundamental situation is also known to remain tense, which may well explain investors’ palpable uncertainty: “The challenging market environment gives investors cause for concern for a variety of reasons, first and foremost. the geopolitical risk in Russia / Ukraine, the upcoming interest rate hikes in the US-Fed or the reversal of monetary policy towards monetary tightening and the economic situation in China “, says Stefan Breintner, DJE market strategist Kapital.

Will the ECB continue to choke the economy?

After the US Federal Reserve’s decision caused market turmoil, investors are now turning their gaze to the ECB. Recently, several central bankers had commented on the theme of interest rate hikes, already expected for the summer.

Robert Halver, market strategist at Baader Bank, is of the opinion that fears of interest rate hikes at the ECB are currently less pronounced: “Even if the ECB were to raise interest rates for the first time in July, this would not be the beginning of a coherent cycle of rate hikes “, underlines the expert. Due to the numerous construction sites and structural problems, the ECB must remain in “care mode”.

collapse of industrial production

In any case, interest rate hikes are unlikely to be good news for the current weakening of the German economy, as they are for the stock market. Incoming orders had already been interpreted yesterday as warning signs of the recession.

According to today’s data, industrial production has also suffered the sharpest collapse since the start of the Crown crisis: German companies cut their production almost four times more than expected after the Russian invasion of Ukraine. According to the Federal Statistical Office, they produced 3.9 percent less in March than the previous month.

What are the prospects for Wall Street?

At the weekend, all eyes are on the monthly US job market report, which will be released at 2.30pm. Analysts expect the robust development to continue with rising employment and falling unemployment. The monthly job market report is also usually followed closely, but in the current situation it could also cause stronger price movements.

The market expects a 400,000 job increase, roughly the same as in March, and a drop in the unemployment rate to 3.50 percent, according to Jeffrey Halley, a market analyst at Oanda. “A large deviation, up or down from the median forecast, should produce a very binary outcome given the schizophrenic nature of short-term financial markets right now,” Halley said.

Rheinmetall customers order ammunition in bulk

Arms group and automotive supplier Rheinmetall received orders for large quantities of ammunition in the first quarter. Across the group, sales of nearly € 1.27 billion were practically on par with the previous year. In the arms systems and ammunition sector, on the other hand, sales increased by 17 percent to 258 million euros. In addition, the division brought in orders worth nearly € 1.15 billion, more than ever. A “large volume ammunition order” from Hungary contributed to this.

Good business for the Heckler & Koch arms company

The Heckler & Koch armament company is also reporting a boom in business. In the first quarter of 2022, sales grew by 22.2% to 77.5 million euros compared to the same period last year. Net income more than doubled from 3.3 to 8.1 million euros. “As far as we can look back, it was the best quarter of the year in the company’s history,” said CFO Björn Krönert. He cited a generally high demand for weapons and more efficient work processes as reasons for the positive figures. H&K manufactures assault rifles, machine guns, grenade launchers and pistols.

Descending IAG

A surprisingly high quarterly loss and limited full-year targets break IAG’s largest price drop in nearly six months. Shares of mother British Airways are down a good twelve percent in London. The company is lagging behind the competition when it comes to recovering from the aftermath of the pandemic, complains analyst Joachim Kotze of the research firm Morningstar. IAG recorded an operating loss of 731 million euros. Seat capacity is expected to reach around 80% in 2022 instead of the 85% previously forecast for 2019.

Good start of the year for Gea

The activity of Gea plant engineering is flourishing. The group is satisfied with the high demand from numerous industrial sectors and starts the year with a record number of incoming orders. Sales grew by nearly 6% to 1.13 billion euros. Gross of restructuring costs, taxes, interest and depreciation, the operating result (Ebitda) was 138 million euros, up 14 percent compared to the previous year. The underlying profit increased even more clearly with a 27 percent increase to 72.2 million euros.

Increase in sales in RTL

The European television group RTL significantly increased sales at the beginning of the year, benefiting from TV advertising revenues and the streaming business. Sales increased 11.3% to 1.6 billion euros. Streaming sales increased by a whopping 23%. RTL pursues the creation of national cross-media champions nationwide across Europe, for example through sales or mergers.

Jump into Evonik’s profits

At the start of the year, the Evonik specialty chemicals group also earned more thanks to still good demand and higher selling prices. Net income increased 69% year-on-year to € 314 million in the first quarter. Evonik had already released key data about two weeks ago and confirmed the annual outlook despite the war in Ukraine and extensive crown blockades in China. In the first quarter, sales increased by a third to almost 4.5 billion euros. 22 percent of the growth was based on higher selling prices.

Autoverband VDA lowers forecasts for new car registrations

The German auto industry is lowering its forecasts for Germany due to the crown blockade in China and the war in Ukraine. The industry association VDA now expects 2.75 million new registrations this year, as its president Hildegard Müller told the “Augsburger Allgemeine”.

The flare-up of the pandemic in China is affecting the sector. “The supplied parts are now being delivered late because the ports are closed, so China worries us,” Müller said. As of February, the VDA still expected 2.8 million new car registrations in Germany this year. In 2021 it was 2.62 million.

Adidas down

Sporting goods manufacturer Adidas disappointed investors with a lower margin forecast. Adidas is struggling with the crown lockdown in China. Analyst Piral Dadhania of Canadian bank RBC assumes that the average market estimates for operating income (EBIT) in 2022 will decrease by about ten percent. The announcement of a long-term strategic partnership with Foot Locker, which a retailer called a positive this morning, took a back seat in light of Herzogenaurach’s new forecasts.

About the author


Leave a Comment