Frankfurt Rising numbers of corona infections and the realization that high inflation could force central banks to act faster once again kept investors in suspense in the first week of the stock market of the year. At the same time, finance professionals are counting on the fact that other topics will come back to the agenda with the start of the accounting season – and that some companies will be positively surprised.
“The start of the German stock market in the stock market year could serve as a blueprint for the full year 2022,” says Commerzbank stock strategist Andreas Hürkamp. “On the one hand, the Dax should continue its upward trend thanks to further rising corporate profits and attractive dividend yields. On the other hand, due to the change in course by the US Federal Reserve, the DAX price fluctuations will increase significantly. “
In the past week, a new Dax record was within reach. On Wednesday, the German benchmark index rose temporarily to 16,285 points. The all-time high is currently at 16,290 points.
But the minutes of the last meeting of the US Federal Reserve turned the markets upside down. In mid-December, the monetary authorities decided to quickly turn away from the crisis mode because of the increased inflation. However, according to the protocol, interest rates could rise even earlier and even faster. In addition, the Fed could quickly begin to shrink total assets.
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The central banks had long insisted that inflation was only temporary. But the assessment could turn out to be wrong. The inflation rate in the euro area rose surprisingly to a record high of five percent in December, as it became known on Friday. In November the rate of price increase was 4.9 percent. In Germany, according to preliminary estimates, inflation rose by 5.3 percent in December, as the Federal Statistical Office announced on Thursday.
US labor market report weighs on stock exchanges
On Friday, the Dax fell 0.7 percent to 15,948 points. Overall, however, the leading index ended the first week of trading of the year with a plus of 0.4 percent.
The US labor market report received special attention from investors. In December, only 199,000 jobs were created outside of agriculture. Experts had expected significantly more. The unemployment rate, on the other hand, fell from 4.2 to 3.9 percent.
NordLB analyst Bernd Krampen commented that the further “substantial job creation” sought by the Fed did not occur quite as expected. The unemployment rate, which is already back at the pre-Corona level, and the high hourly wages still require a realignment of monetary policy, says the expert.
Investors fear of rapidly rising interest rates is increasing. Tech stocks and growth stocks are the main hit on Wall Street. The technology-heavy Nasdaq index lost around one percent on Friday. In contrast, the Dow Jones index of standard stocks remained virtually unchanged.
An eye on inflation in the USA
Inflation will therefore remain a dominant topic on the stock markets in the new week. New inflation data will come from the US on Wednesday. Edgar Walk, chief economist at Metzler Asset Management, expects the inflation rate to have risen to 7.1 percent in December.
The key question for investors this year will therefore be, according to Commerzbank economist Bernd Weidensteiner, whether inflation will decrease again over the course of the year or whether the Fed will have to step more on the brakes.
“The US Federal Reserve could act much more aggressively than currently expected by raising key interest rates by a total of 100 basis points. We see a 30 percent probability of occurrence, ”says Walk from Metzler Asset Management.
At the European Central Bank (ECB), on the other hand, interest rate hikes are likely to be even further away. For example, Commerzbank is not expecting any interest rate hike this year. Other observers consider this to be possible in December 2022.
Dip in growth due to delivery bottlenecks
Another topic that investors are currently concerned with is the corona pandemic. Sharply increasing numbers of infections due to the new Omikron variant lead to new question marks regarding the economic development. Helaba analyst Ulf Krauss says: “The rapid spread of the mutation in connection with quarantine measures threatens to bring some industries to the edge of a lockdown temporarily.” This is not an easy situation for German industry.
DZ Bank analyst Sven Streibel is nevertheless positive about the further course of the year on the stock markets. Although the expectations for the first half of the year are somewhat subdued due to the corona-related dip in growth in winter and spring, he expects that “the existing economic problems such as delivery bottlenecks will be brought more and more under control and the economic recovery will literally be free in the second half of the year at the latest ‘Give a ride’.
Hope for increasing profits at US banks
Initially, however, the upcoming corporate accounting season will be of interest to investors. In the new week, special attention will be paid to US banks. Wells Fargo, JP Morgan Chase and Citigroup will open the books next Friday. The numbers for the third quarter were very good in the US banking sector. Analysts also expect rising profits for the full year. The prospect of rising interest rates also gave the shares a strong start to the new year.
In this country, investors will have to be patient until the companies present their business figures for 2021. Hürkamp from Commerzbank expects investors to face a promising dividend season thanks to rising corporate profits. According to Factset, the market expects 31 dividend increases in the Dax.
There are individual results from companies whose fiscal year did not end in December, however, in the new week: On Tuesday, quarterly figures from the online fashion retailer About You will come. The auto supplier Hella will follow on Thursday with half-year figures and the sugar producer Südzucker with the announcement for the third quarter.
Thyssen-Krupp also has Capital Markets Day. The natural catastrophe balance sheet, which the reinsurer Munich Re published on Monday, is also exciting.
The economy will also remain in view next week. The so-called Beige Book, which provides up-to-date information on the economic situation, will come from the USA on Wednesday. Industrial production and retail sales in December are on the schedule on Friday. Private consumption is seen as an important pillar of the economy in the USA. In this country, the Federal Statistical Office will publish the gross domestic product for the full year 2021 on Friday.
More: The interest rate turnaround scares the markets – “healthy and necessary”