Dusseldorf The dominant theme on the German stock market is a stable lower price basis. This is also shown by the course of trading on Thursday: the Dax finally closed 2.2 percent lower at 13,698 points after a roller coaster ride. With Merck, only one Dax company was in the profit zone at the end of trading.
It had looked like a friendly trade in the morning. In the afternoon, however, it fell by more than 200 points within a short time. This proves once again: trading is currently characterized by sudden, rapid price movements.
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 war continues to dominate market developments.
But the price potential of a rally due to positive news is significantly greater than the probability of another crash if the conflict should escalate – because hardly any investor is currently expecting a quick relaxation in the war and a subsequent rally.
Top jobs of the day
Find the best jobs now and
be notified by email.
Many former optimists among the professionals have not only sold their shares in the past few days – presumably 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.
Short betting as a kind of safety net
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”. At the same time, he expects “little resistance” from the investors surveyed in the event of a recovery rally.
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 more than 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.
Oil price falls again
Speculations about a return of Iranian oil to the world market are putting a temporary end to the boom in Brent and WTI. After the prices had again reached multi-year highs, things went downhill in the afternoon.
According to market rumours, the US is easing its sanctions against Iran. However, the possible additional delivery volumes are not enough to compensate for an imminent loss of Russian exports, warns analyst Helima Croft from the investment bank RBC Capital Markets. The fear of supply bottlenecks had caused a dynamic rally on the oil market.
Ruble falls to record level
The ruble also came under pressure again on Thursday. In return, the dollar appreciated. The daily high was 118.6 rubles per dollar. Here, too, a counter-movement began in the afternoon.
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. The stock exchange in Moscow remained largely closed on Thursday. You will be informed about the further procedure before 7 a.m. Central European Time on Friday.
“For now, Russia is no longer accessible to German investors”
Meanwhile, 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.
There is also movement on the metal exchanges in view of the threat of supply bottlenecks. At $3,804 a tonne, aluminum costs more than ever in London. Nickel is up 6 percent to $27,663 a ton. 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.
And the price of palladium continues to climb. The metal, which is used among other things in car catalytic converters, has increased in price to up to $2,798 per troy ounce (31.1 grams). This is the highest level in almost eight months. Russia accounts for 40 percent of world palladium production.
Also on the upside is gold, which is often targeted as a safe haven in uncertain times. The precious metal rose 0.5 percent to $1,934 a troy ounce.
Quiet trading of ETFs on Russian indices
Trading in exchange-traded funds (ETFs), which refer to indices composed of Russian stocks, also fell on Thursday. The Lyxor MSCI Russia fell by more than eleven percent. The loss in value since mid-February is 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. Therefore, Lyxor has not yet suspended the issue and redemption of shares in this ETF. GDRs are depositary receipts that certify 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 was again over a quarter.
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. Threatened burdens from the financial involvement in Nord Stream 2 pushed Engie’s shares by more than six 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 also slipped by more than six percent in Helsinki. CEO Markus Rauramo said that all new investment projects in Russia have been stopped until further notice. The shares of the Düsseldorf subsidiary Uniper fell in the MDax by up to 17.6 percent to EUR 22.01, the lowest level since August 2017.
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 gained more than 5 percent.
Merck: The German pharmaceutical manufacturer can increase profits significantly and expects a successful year. The share was the only winner in the Dax with an increase of 1.3 percent.
Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.