Frankfurt A directional decision is likely to be made on the German stock market this trading week. Four important interest rate decisions are pending at the meetings of the US Federal Reserve, the European Central Bank and the central banks of Japan and China.
Accordingly, capital market expert Thomas Altmann from the fund house QC Partners believes: “It is quite possible that this week will be the decision on the direction of the stock market in the coming weeks.” we measure … an increasing irritation. This usually subsequently leads to increased market volatility.”
However, there is little sign of increased fluctuations on Monday. The Dax closed at 16,097 points, an increase of 0.9 percent compared to the closing price on Friday.
Two points speak for a directional decision: On the one hand, there is the duration of the sideways movement. The leading German index has been moving sideways for more than eight weeks, a rather unusually long period.
Apart from the four-day excursion above the 16,000 point mark with the new record high, the Dax moved in a range of only 400 points. And including the record high, the range – 15,625 points on the bottom and 16,322 points on the top – was only around 700 points.
Jörg Scherer, technical analyst at HSBC Germany, is therefore certain: “In order to secure the price gains that have accumulated in the course of 2023 so far, this zone (at around 15,600 points) is a strategic hedge.”
In addition, this range is even narrowing. In the past week of trading, the Dax was only 1.3 percent between high and low. “That can hardly be surpassed in terms of lack of movement,” says Altmann. However, it cannot be assumed that the leading index will also be “on the road in a sleeping car” this week.
On the underside, this range of 15,600 to 15,700 points has been relevant since the beginning of April. Investors can no longer assume that this range will hold. Because the short sellers, who are betting on falling prices, this area is no longer enough to liquidate their positions.
Should it go down in the coming trading days, a larger price slide becomes more likely. Maybe that will herald the first correction of the stock market year, that would be a decline of ten percent.
It is difficult to predict in which direction the Dax will resolve its sideways phase. There is much to be said for a price slide, alone the price gains of more than 30 percent since the end of September last year. So far there has not been a correction, i.e. a price drop of at least ten percent from an intermediate high.
Another view also signals falling prices at the moment. In contrast to almost all other major stock market indices, the Dax is a performance index that includes dividends. Without the dividends that were paid out this year, the leading index would be around 300 points lower.
Central banks could ensure a continuation of the rally
Nevertheless, investors should not write off the current stock market rally, but wait and see. Despite all the adverse geopolitical and economic circumstances, the Dax is still trading at a very high level and is holding important supports.
The central banks, of all people, could be the trigger for a further increase: Especially if they raise interest rates again slightly this week by 0.25 percentage points, but also indicate in the wording that the tightening of monetary policy could be completed for the time being. That could lift the leading German index upwards.
A new record high would possibly be a real liberation. Because the current all-time high from mid-May with 16332 points fits well with the “old highs” from 2021 and 2022, which are 16,290 and 16,285 points. This triple cap seems almost insurmountable, so a successful breakout would have major consequences, according to Jörg Scherer.
An important step towards a record high would be prices above 16,144 points. From there, the move down began after reaching 16,332. Today’s daily high of 16,126 points was only 18 points away from this crucial mark.
The Turkish lira continues to fall
New trading day, new lira record low. It’s been like this on the foreign exchange market for a few weeks. The dollar and euro hit their highest levels in history on Monday at 23.73 and 25.52 lira respectively.
According to Commerzbank FX analyst Tatha Ghose, “movement in the dollar/lira ratio, as well as anecdotal reports, suggest the exchange rate is stable as state banks have once again started defending the lira.” So the market is not necessarily convinced that Turkey will now adopt a different economic policy.
Investors are of course hoping that with the appointment of Hafize Gaye Erkan as Governor of the Central Bank of Turkey (CBT) and Mehmet Şimşek as Minister of Finance, Turkey will return to “reasonable” economic policies and fight high inflation with higher interest rates.
But the Turkish President Recep Tayyip Erdogan is a self-proclaimed “interest enemy” and wants to boost the economy with cheap money. However, because the exchange rate of the lira falls as a result, imports become more expensive and inflation heats up.
This “unconventional” Turkish economic policy emanates directly from the one man at the top and is unlikely to change as long as Erdogan remains President. “For the most part, the FX market sees through this issue, so a easing of FX intervention by the CBT and state banks could be followed by a massive move in the dollar/lira rate,” Ghose said.
Look at individual values
burning day: At the Dax group are presented for the first time US shareholder advisors fully backed an aggressive hedge fund. That should cause tension at the general meeting on Thursday. The share profited from this dispute and rose by 2.1 percent by the end of trading.
>> Read here: How activist investors want to hijack the Dax group
Rheinmetall: An optimistic outlook encourages investors to buy. The shares of the armaments group and auto supplier rise by 3.6 percent. CEO Armin Papperger described a market value of 17 billion euros as realistic thanks to the brilliant business prospects in an interview. The market capitalization is currently a little over ten billion euros.
Adidas: A positive analyst comment heaves the paper up. The shares of the sporting goods manufacturer increase by 5.5 percent to 168.84 euros. The experts at Bank Bernstein have raised the target price from EUR 155 to EUR 190.
CTS Eventim: After critical statements in a TV show, investors withdraw. The ticket marketer’s shares fell by 8.9 percent. In the “ZDF Magazin Royale” show, moderator Jan Böhmermann criticized the company’s market power and fee policy, among other things.
Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.