After the start of the war, Dax falls below the 14,000 point mark

The stock market barometer ended yesterday, Wednesday, at 14,631 points, down 0.4 percent. On this day, the Dax failed in its attempt to break through the important mark of 14,800 points, which, according to technical analysis, determines the medium-term trend.

Despite the massive price losses at the start of trading today, there are many signals that the Dax is at the end rather than the beginning of its downward trend that has been running since the beginning of the year.

Does the motto now apply: buy more during the crisis?

On the one hand, there is the principle of buying more in crises. According to Konstantin Oldenburger, market analyst at online broker CMC Markets, the past major armed conflicts such as the Vietnam War, the Gulf War, the NATO mission in Afghanistan, the Iraq War and the Crimean crisis eight years ago showed a similar pattern on the stock exchange. “In all cases, the markets found a bottom on the day of the ‘invasion’,” explains Oldenburger.

Of course, investors cannot compare every armed conflict with one another. Because in this case – in contrast to other wars – there will be severe sanctions by the USA and the EU against Russia. And once new sanctions have been issued, the stock exchanges must first assess what consequences these will have for the western economies. Apart from its status as an energy supplier, however, Russia is otherwise of little economic importance.

Of course, an oil price above $100 should fuel inflation. But shortly before the start of the second Iraq war in March 2003, the price of oil rose to a new high. It was $40 back then. But that didn’t stop the Dax from climbing significantly after George W. Bush’s order to invade.

Bottoming possible in the range of 13,500 to 13,800 points

Technical analysis is now also signaling an end to the downtrend or at least a longer pause for breath. After breaking the medium-term mark of 14,800 points at the end of last week, there is a calculated downward potential of 1,200 points. To explain: For ten months, the Dax fluctuated between 14,800 points on the lower and 16,000 points on the upper side. This difference is subtracted from the bottom and results in 13,600 points. The Dax is not far away from that.

The range also aligns with the former breakout levels at 13800/13500 which are coming back into focus. This area was a key resistance in late 2019/early 2020. It took months before this could be overcome.

For Martin Utschneider, technical analyst at private bank Donner & Reuschel, there could be a floor at 13,566 points. “However, this remains to be seen. The risks and uncertainties are – as of now – too high,” he explains.

One can smile at such calculations by chart technicians. However, in the Handelsblatt chart discussion, the technical analysts predicted both the course of the stock exchange year 2021 and the price slide this year in exactly the same way.

Of course, the Dax can fall even lower. Hence the warning: Sustainable courses below 13,500 points are likely to damage the technical picture of the leading German index in the long term, with unforeseen effects. But the current economic data do not show that. Corporate earnings season, for example, is going very well.

Investor sentiment signals sharp but brief sell-off

The investor mood in the form of the Handelsblatt survey Dax-Sentiment also signals an end to the downward trend rather than a further significant slide. The five-week moving average of sentiment, an indicator that has been accurate for years, is trading at a negative level. That’s why sentiment expert Stephan Heibel predicted last Monday: “In the worst case, another slide might be severe, but only short.”

Historically, the central banks usually came to the aid of the stock market traders in difficult times. For Thomas Altmann from the investment house QC Partners “this time, however, it is more difficult than ever”. The energy prices, which are now rising even faster, have the potential to fuel inflation even further. Therefore, at most, the central banks can be expected to shift and slow down the tightening of their monetary policy.

This is exactly what is already being priced into the market. The probability for the pros on the Chicago futures exchange is 90 percent that there is only a 25 basis point rate hike. And bond yields are falling sharply. For a ten-year US government bond, this value is only 1.8957 percent after values ​​of over two percent in the previous week. The yield on a ten-year Bund falls to 0.149 percent.

Trading halt on the Moscow Stock Exchange

The euro reacted by falling against the dollar. Currencies that are perceived as safe, such as the dollar or the Japanese yen, gained popularity. The Russian ruble fell more than 6 percent against the dollar. One euro cost $1.1250 in the morning, and the euro had fallen to $1.1209 early in the morning. That was about a cent less than last night.

The ruble fell to a record low against the dollar, nearing 90 rubles per dollar, after the Moscow Stock Exchange suspended trading on all markets. The country’s biggest stocks, including Sberbank PJSC, Gazprom PJSC and Lukoil PJSC, fell around 30 percent in an early session ahead of the suspension.

In the meantime, trading on the Moscow stock exchange has resumed. The index Moex there is only 24 percent in the red after an interim loss in value of almost 40 percent. The RTX Russian Traded Index, which is traded on the Vienna Stock Exchange and is quoted in dollars and made up of 14 large Russian stocks, initially halved. The minus is currently 34 percent.

After the Russian stock market crash, the central bank stops short selling. Such transactions are used to bet on falling prices. The central bank announced that the stop applies to the stock exchanges and the over-the-counter market (OTC) until further notice.

The futures market is pricing in a rate hike by the Russian central bank of at least 500 basis points over the next three months to stem the currency’s slide. Policymakers have raised interest rates by 525 basis points over the past 12 months to curb inflation.

Oil price climbs above $100

Oil prices rose sharply on Thursday following Russia’s attack on Ukraine. A barrel (159 liters) of North Sea Brent cost more than $100 for the first time since 2014. Most recently, the Brent price rose 8.8 percent to $105.35. This means that the increase in the Brent price this year has already totaled around 30 percent after the rate had doubled last year.

The situation is similar with oil from the American West Texas Intermediate (WTI) variety. Here, the price of a barrel rose 8.7 percent to $100.11 on Thursday.

The price of gold also climbed to its highest level since January 2021 on Thursday. A troy ounce (around 31.1 grams) cost 1,967 US dollars, 3.1 percent more. Investors are currently looking for forms of investment that are considered safe, such as gold.

Palladium price continues to rise

Russian countermeasures could include an export ban on important raw materials to Western countries. In the case of precious metals, according to the Commerzbank analysts, palladium would probably be affected. Russia is the second largest palladium producer in the world, just behind South Africa. The raw material is used in autocatalysts, for example. If the automobile manufacturers have not stocked up on sufficient material in the last few months, production would probably have to be cut back in the event of supply restrictions.

Obtaining the required quantities of palladium elsewhere is unlikely to be possible. At least the South African producers do not see themselves in a position to compensate for the supply shortfalls from Russia. The price of palladium, which rose a good five percent on Wednesday, continued to rise this morning to almost $2,600 a troy ounce. This is the highest level in more than six months.

Aluminum price at record high

Aluminum price has soared to record high amid Russian attack on Ukraine. On the London Stock Exchange, a ton rose 2.9 percent to $3,388 on Thursday morning. The price of the metal thus surpassed the previous high that was reached during the economic crisis in 2008.

The sharp rise in prices could further intensify inflation, since aluminum is contained in many products. Russia is one of the world’s largest providers. Natural gas is important for aluminum production. A rise in gas prices is likely to put European aluminum producers under pressure.

The crypto markets also reacted and fell significantly. Bitcoin, the largest digital currency, lost a good eight percent during the night and cost $35,573. The second largest cryptocurrency, Ether, fell 11 percent to $2,397.

Bank stock prices plummet

In terms of individual stocks, banks were among the biggest losers. the appropriate one industry index yields around eight percent. The shares of the financial institutions Raiffeisen Bank, Unicredit and Société Générale (SocGen), which are heavily involved in Russia, lost between 17 and eleven percent. Commerzbank shares fell 9.7 percent, Deutsche Bank 8.8 percent.

Look at other individual values

Defense stocks: The Russian attack on Ukraine gives Western defense values ​​a boost. Rheinmetall and BAE Systems shares are each up four percent to two-year highs of 100.65 euros and 624.6 pence respectively. In Paris, rival Thales’ titles increased by 2.5 percent.

Mercedes Benz: After a jump in profits, the carmaker is increasing the dividend for shareholders. This should now rise from EUR 1.35 per share for the previous year, which was burdened by corona lockdowns, to a surprisingly high EUR 5.00. This caused the Mercedes-Benz share to fall by 4.5 percent in an extremely weak market environment.

Heidelberg Cement: The building materials group intends to raise prices further in view of rising energy costs. Because the persistently high costs remained a challenge, especially in the first half of the year. Since the construction industry is booming with investments in infrastructure worldwide and with dynamic private residential construction, CEO Dominik von Acht is confident for 2022. Sales are expected to increase significantly and the operating result to increase slightly. The stock loses almost eight percent.

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