Bargain hunters push the Dax – but a risk remains

Many investors are now expecting the Fed to hike rates by a full percentage point this month in a bid to fight inflation. However, Fed members Christopher Waller and James Bullard took some wind out of the sails, emphasizing that they would prefer a 75 basis point move.

Investors are also concerned about weak economic data from China. China’s economic growth plummeted in the spring, fueling concerns about a global economic slowdown.

Mainly because of the tough corona lockdowns, gross domestic product only increased by a meager 0.4 percent within a year, as Beijing announced on Friday. However, retail sales were better than expected, strategists said. The CSI300 index of the largest listed mainland companies fell a significant 1.6 percent.

Investors are also looking at the government crisis in Italy: Although Mario Draghi’s government survived a vote of no confidence, the prime minister announced on Thursday evening that he would submit his resignation to President Sergio Mattarella. However, the President declined to resign. However, during the day there was speculation about snap elections. The chances of reviving the broad coalition under the former ECB President were assessed as slim in Draghi’s environment on Friday.

The sell-off in the country’s government bonds accelerated on Thursday. In return, yields had risen. After the yield on ten-year government bonds rose to 3.549 percent, they calmed down to 3.35 percent. The yield gap to the ten-year federal paper widened to 2.28 percentage points, the widest gap in a month.

On the stock market, too, tempers calmed down somewhat. After the Italian leading index FTSE MIB slipped 3.4 percent on Thursday to its lowest level since November 2020, the index rose by 1.7 percent on Friday morning.

Investors are once again focusing on the USA

In the US, following the big banks JP Morgan and Morgan Stanley, some rivals are releasing business figures for the second quarter. The industry got off to a bad start in the accounting season: the institutes reported a slump in profits because of billions in provisions. Wells Fargo reported in the afternoon on high provisions for impending loan losses and a weak mortgage lending business, which also brought the US bank a profit slump in the spring. Citigroup also reports declining earnings but strong trading results.

However, the so-called small expiry date did not cause any major disruption: on the futures exchanges, options on individual shares and indices expire and are settled. In the run-up to and on the day itself, institutional investors usually try to move the prices of the securities on which they hold derivatives in a direction that is favorable to them. The options for the Dax expired slightly below the current level at 12,725 points, the options on the Euro Stoxx 50 at 3449 points.

Investors should also keep an eye on the raw material markets: the price of copper continued to drop significantly, was now almost three percent lower and fell below the $7,000 a ton mark.

The price of the important industrial metal copper, a much-noticed economic barometer, has fallen by 30 percent since the beginning of July. The phenomenon of falling prices on the futures markets with a simultaneous tight supply situation in physical trading is even more pronounced on the copper market than with crude oil.

Robert Edwards, an expert on copper at the analysis company CRU, attributes the recent drop in prices to the withdrawal of financial investors. They have massively reduced their bets on the futures markets on rising copper prices. Stéphane Monier, chief investment strategist at private bank Lombard Odier, confirms: “Markets are increasingly pricing in the risk of a recession in the US and Europe in 2023.”

The price of North Sea Brent oil has climbed back up to the $100 mark for a 159-liter barrel. Crude oil prices have fallen from $123 a barrel in early June to $97. However, this is still well above the range of 60 to 70 dollars in which the oil price was moving before the outbreak of the corona crisis, and very few expect prices to continue to fall significantly.

Because the supply side of the oil market is still limited. Saudi Arabia and the other countries in the OPEC plus oil alliance want to increase their oil production from September. But many state oil exporters are already producing at the capacity limit.

The price of gold is also under slight pressure again and is moving slightly above $1700 a troy ounce. So far this week, the precious metal has lost almost two percent.

Above all, concerns about an even larger US interest rate hike after the renewed increase in inflation figures are causing the price to continue to fall, since bonds with their current yields would continue to become more attractive as an alternative to gold. The continued strength of the US dollar is also weighing on the price of gold because it makes the precious metal less attractive to investors outside the US.

Look at individual values

Volkswagen: Volkswagen shares were in demand and increased by almost five percent at the top. Apparently, investors are enthusiastic about the increased e-car sales. It is true that VW had to cope with a slump in sales in the first half of the year due to a shortage of chips and supply chain problems. Worldwide sales fell by 22.2 percent to 3.875 million vehicles, as the Wolfsburg carmaker announced on Friday. Central and Eastern Europe were hit the hardest with a drop of 40.9 percent. Western Europe – the second largest market after China – also recorded a significant decline of 20.7 percent. The sports car subsidiary Porsche, which is scheduled to go public in the fourth quarter of 2022, got off relatively lightly with a minus of 5.1 percent.

However, Volkswagen was able to achieve strong growth with its electric cars. Deliveries of battery electric vehicles (BEVs) jumped by more than a quarter to 217,100. The BEVs thus achieved 5.6 percent of total sales. This is mainly due to the significant growth in China, where the number of 63,500 BEVs more than tripled compared to the same period last year.

Lufthansa: A jump in sales and an operating profit in the quarter give Lufthansa a boost. The airline’s shares are up nine percent. This is the biggest price jump in over four months.

Unipers: Uniper’s shares jumped by almost ten percent at the top of the MDax. The ailing energy supplier benefited from the fact that the US investment bank Goldman Sachs canceled its sell recommendation and now recommends the stock as “neutral”.

Software Inc: Software AG shares lost up to eight and a half percent. They thus continued their descent and slipped to the lowest level since spring 2020. The group lowered its annual target for incoming orders in the digitization division.

Drägerwerk: After the slump in sales and earnings in the first half of the year, investors threw Drägerwerk out of their depots. Shares fell more than 5 percent at the top. The medical technology manufacturer has presented “terrible” quarterly figures, said a dealer. In view of the negative EBIT margin, it is difficult to imagine that the profitability target will be achievable for the year as a whole.

Alibaba: In Hong Kong, the shares of the online retailer fell by almost six percent. According to a report by the Wall Street Journal, the group’s cloud service is being scrutinized by state authorities in connection with lost police data.

Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.