The German stock exchange barometer is again above the important mark of 14,800 points, yesterday’s slide below was – so far – not sustainable. Martin Utschneider, technical analyst at private bank Donner & Reuschel, is certain: “Today will show whether this break will also be sustainable.”
So far, the leading German index has been an adventurous roller coaster ride. If the Dax recovers at the close of trading, it would be the sixth change of direction in a row in which positive and negative sessions have alternated.
With yesterday’s price slide down to 14,703 points, the consolidation has expanded significantly, the minus compared to the high for the year on Thursday last week is around 6.5 percent at its peak. That’s a decent setback, as experienced stockbrokers would say.
A renewed slide below the mark of 14,800 points is likely to end this roller coaster ride and set a new trend for the Dax, a sustained downward trend. To prevent this from happening, the US stock exchanges also have to play their part.
Yesterday, Wednesday, before the announcement of the Swiss central bank’s rescue package, they closed in the red, at least the Dow Jones and S&P 500 indices. If these two US stock market barometers do not quickly rise above their 200-day line, the Dax is also threatened with further trouble.
Bank stocks on course for recovery
Bank share prices currently have the greatest influence on the market as a whole. They are going on a recovery course this Thursday. The European sector index Stoxx Banks with its 22 members rose by four percent. As recently as Wednesday, the index had slipped 8.4 percent, down over 16 percent week-on-week.
Credit Suisse shares, which slipped as much as 31 percent on Wednesday, are up more than 40 percent. The shares of Deutsche Bank and Commerzbank also increase by 5.2 and 3.9 percent.
The development of credit default insurance, known in technical jargon as credit default swaps (CDS), shows how dramatic the situation was. With these, professional investors can protect themselves against the insolvency of the issuer of the bond.
On Wednesday, that figure rose to as much as 12.8 percent a year for a five-year bond. The value has never been higher. A high percentage given a five-year Credit Suisse bond that had recently returned just over 3 percent annually.
However, the CDS values for the two major German banks have risen only slightly, which is good news. At Deutsche Bank, professional investors had to pay 1.24 percent annually to protect themselves against insolvency, at Commerzbank it was 0.8 percent.
A report by the business news service Bloomberg shows which problems Credit Suisse was still facing. Major French bank BNP Paribas has informed its clients that it will no longer accept requests to underwrite its derivatives contracts when Credit Suisse is the counterparty. BNP Paribas is a big player in the derivatives market, this approach could have triggered a chain reaction that would have further burdened the major Swiss bank.
As a reminder: During the financial crisis, German savings banks had sold guarantee certificates from the US bank Lehmann Brothers. The fact that the paper bears an issuer risk was not only realized by the vast majority of investors until Lehman Brothers actually filed for bankruptcy, but also by many savings bank board members and consultants.
With its rescue package, the Swiss National Bank, like the US Federal Reserve, is sending a strong signal. The central banks obviously want to end the current crisis before it can infect other institutions.
ECB rate hike in focus
The European Central Bank will then be in focus today, Thursday. Before the market turbulence, one thing was clear: interest rates would be increased again by 0.5 percentage points. Because price stability is the mandate of the ECB and the inflation rate is still far too high.
Still, recent bank troubles have increased the prospects for a hike of just 25 basis points. According to the capital market expert Thomas Altmann, the ECB will remain on its path of increases in order not to stir up additional panic. “An abrupt change in course with an immediate stop to increases would be a fatal signal to the stock exchanges,” he says.
Since July 2022, the monetary authorities have raised interest rates five times in a row in the fight against high inflation, and the key interest rate in the euro area is now three percent. Higher interest rates make borrowing more expensive, which can curb demand and counteract high inflation.
Look at the individual values
Morphosys: The biotech has trimmed its loss significantly over the past year. In 2022 there was still an operating loss of almost 221 million euros after a loss of a good 508 million euros a year ago. The group did not issue a profit forecast. The share rose by 8.4 percent.
Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.