Dax climbs back above the 14,000 point mark

The current survey by the Frankfurt Stock Exchange among medium-term institutional and private investors signals some hope that stock market times will improve again. Of course, the news about the Ukraine conflict continues to dominate market developments.

But the price potential of a rally based on positive news is significantly greater than the likely extent of another crash if the conflict should escalate – because hardly any investor is currently expecting a quick relaxation in the war and thus a rally.

Short betting as a kind of safety net

Many former optimists among the professionals have not only sold their shares in the past few days – probably with high losses – but then immediately bet on falling prices. According to the sentiment analysis, this is positive for the further development of the stock markets.

Because: These investors have to part with their short positions when prices rise again so that the losses do not get out of hand. And when prices are falling, a high number of short bets creates a kind of safety net, because these professionals should then be able to make profits by selling the short derivatives.

Such speculation works like short selling in hedge funds. When buying a short product, the underlying asset is sold first and then bought back again when this short position is closed.

However, for the behavioral economist Joachim Goldberg, after evaluating the survey data, “the proportion of pessimists is far from high enough to be able to rely on substantial domestic demand in the event of further price declines”. But a “recovery rally would meet little resistance from the investors we surveyed.”

A comparison with the US stock market barometers is also interesting in this context. Since the war officially began on February 24, the Dax has fallen by around four percent, while the US indices have risen slightly over this period.

This can of course be explained by the war in Europe, which is far away for the USA and has a significantly lesser impact on the economy there. However, should this difference widen, European and especially German stocks should become interesting again for international fund managers.

Brent oil price climbs towards $120

Oil prices continue to rise amid war in Ukraine. On Thursday, the two major oil grades, Brent and West Texas Intermediate (WTI), marked their highest levels in many years. A barrel (159 litres) of North Sea Brent cost up to 118.20 US dollars, which is as much as it was last time in 2013.

Ruble falls to record level

The ruble continues to depreciate in Moscow trading. On the other hand, the dollar appreciated by 20 percent to 117 rubles and reached a new record value of 118.68 rubles.

Rating agency Fitch said the US and EU ban on all transactions with Russia’s central bank Bank of Russia will have a much bigger impact on Russia’s credit fundamentals than any previous sanctions. According to Moody’s, the severity of the sanctions “exceeds Moody’s initial expectations and will have a significant impact on credit ratings.”

Fitch and Moody’s have accordingly downgraded Russia’s credit rating to “junk” level. This has an impact on the yields on Russian government bonds. The value of the state bond maturing in 2028 rose from 12.93 percent the previous day to currently 13.93 percent.

According to the Russian central bank, the stock exchange in Moscow will remain largely closed on Thursday. You will be informed about the further procedure before 7 a.m. Central European Time on Friday.

Index providers MSCI and FTSE Russell are removing Russian stocks from their mainstream indices, isolating the stocks from much of the fund industry. The changes to the composition of emerging market funds will be implemented on March 9, MSCI said in a statement late Wednesday evening.

The prospect of raw material supply bottlenecks due to Russia’s escalating dispute with the West is driving prices on the metal exchanges higher and higher. At $3,691.50 a tonne, aluminum costs more than ever in London. Nickel is up 6 percent to $27,470 a ton after hitting its highest level since April 2011 at $27,815. Copper rose 2.5 percent to $10,425 a ton. Sanctions by Western nations have prompted the world’s three largest container lines to suspend shipments of cargo to and from Russia.

Trading in exchange-traded funds (ETFs), which refer to indices composed of Russian stocks, was comparatively quiet on Thursday. The Lyxor MSCI Russia fell only 2.6 percent. However, the loss in value since mid-February is already over 80 percent. This ETF invests in GDRs (Global Depository Receipts) which, although the Moscow Stock Exchange is currently closed, are still traded in London. As a result, Lyxor, now part of Amundi, has not yet suspended the issuance and redemption of shares in this ETF. GDRs are depositary receipts that represent ownership of shares.

The ETF of the Deutsche Bank subsidiary X-Trackers MSCI Russia Capped Swap ETF will also continue to be traded on the fully electronic Xetra platform. The price of the index fund has fallen by around 70 percent since mid-February. On Thursday, the minus is eight percent.

Stocks with a high proportion of business in Russia lose significantly

Among the individual stocks, the focus once again came to companies across Europe that were struggling with the uncertain future of their business in Russia. Impending burdens from the financial commitment to Nord Stream 2 pushed Engie’s shares by more than three percent to the bottom of the Paris leading index. The energy company put its outstanding credit risk in connection with the pending Baltic Sea pipeline project at up to $1.1 billion.

The shares of the Finnish energy group Fortum temporarily slipped by four percent in Helsinki. In the past five trading days they have lost more than 17 percent. CEO Markus Rauramo said that all new investment projects in Russia have been stopped until further notice. The titles of the Düsseldorf subsidiary Uniper fell in the MDax by up to 11.6 percent to EUR 22.01, the lowest level in two years.

Look at other individual values

GFT: Thanks to high demand, the IT service provider significantly increased its earnings last year. The pre-tax profit almost tripled. For 2022, the group expects sales growth of 20 percent thanks to a high level of incoming orders. The stock is up more than 6 percent.

Merck: The German pharmaceutical manufacturer can increase profits significantly and expects a successful year. The share leads the Dax list of winners with an increase of 2.7 percent.

Gea: The plant manufacturer, which produces for the food and beverage industry, earned more last year and wants its shareholders to participate with a higher dividend. The shareholders are to receive EUR 0.90 (previous year: EUR 0.85) per share. In view of the record order backlog of around 2.8 (previous year: 2.3) billion euros, the Management Board is confident of further growth in 2022. The paper is but 3.7 percent.

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