Frankfurt The German share index Dax started with slight price gains in the middle of the week, but prices then slipped over the course of the week. Profit-taking and poorer economic prospects in view of the Ukraine war had a negative impact. The leading index ended trading at 14,284 points – a drop of 1.3 percent. The Euro Stoxx 50 also lost a good 1.6 percent.
The upside potential is limited because a possible ceasefire in Ukraine is already built into the prices, said an analyst. On Tuesday, the leading German index had gained a good percent. Stocks in the US also rose. Technology stocks in particular were in demand, with the Nasdaq index rising by around two percent. The prospect of a potentially steeper-than-expected rate hike by the US Federal Reserve also buoyed financials.
The new motto of investors is generally that equities are currently the best insurance against inflation, which is picking up significantly in Europe and the USA. In terms of economic data, investors today looked at the Ifo economic forecast.
“We only expect growth of between 2.2 and 3.1 percent this year,” said Ifo economics chief Timo Wollmershäuser on the new forecast by the Munich economists and government advisors. So far they had expected an increase in gross domestic product (GDP) of 3.7 percent. Inflation is likely to rise faster than expected. The institute expects 5.1 to 6.1 percent for 2022 instead of the 3.3 percent expected in December.
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The analysts of the National Bank point to the different consequences of the war for the stock markets in the USA and in Europe. In the US, the economy is doing extremely well, there is no dependence on Russian oil and gas, and many companies are much more domestically focused than in Europe.
On the old continent, the uncertainties are significantly greater. Questions are, for example: How do the high energy prices affect consumer behavior and companies? How can the dependency on Russia with regard to energy procurement be reduced or ended as quickly as possible? What about the stability of supply chains? How strong are the feedback effects of Western sanctions on the overall economy and the corporate sector?
diversification required
As a result, the European stock markets are in a significantly worse situation than their US counterparts in view of the large number of imponderables. The high importance of international diversification in equity investments, which is often described, is currently showing its validity.
In the current situation, the experts at National Bank believe it makes sense to further expand stock positions on the US market. However, one element of uncertainty has been resolved for the time being. With the initiation of the US interest rate hike cycle and the indication of the further interest rate path, the US Federal Reserve has ensured a certain calming, at least on the interest rate side.
For the experts at Banque de Luxembourg Investments (BLI), stock selection is becoming increasingly important. A distinction must be made between companies that can pass on rising production costs to their customers through higher sales prices and companies that have to absorb this increase by reducing their profit margins. In an environment of rising interest rates, companies with high levels of debt should also be avoided.
Bond prices tend to remain under pressure
The prospects for government bonds and corporate bonds are currently rather weak. The statements by Fed central bankers that key interest rates in the USA could also be raised more significantly are likely to put further pressure on prices. On Wednesday, however, there was initially a stabilization, the yield on the ten-year federal bond fell to 0.467 percent.
When prices fall, yields rise. The yield on the ten-year US government bond has recently climbed noticeably to around 2.4 percent. The global Bloomberg Global Aggregate Index has fallen 11 percent since January 2021. The decline is even stronger than during the financial crisis of 2008. At that time the minus was 10.8 percent.
Oil prices stabilized
Oil prices rose on Wednesday. A barrel of North Sea Brent cost around $121 per barrel (159 liters) – an increase of around five percent. In view of the war in Ukraine, price fluctuations remain high, and there is still great uncertainty.
Many countries have imposed sanctions on Russia, one of the world’s largest oil producers, and the arguments for an oil embargo are becoming louder amid renewed attacks on civilians. This would probably lead to further price increases. Oil company stocks also rallied.
Individual values in focus
Car1: The online used car dealer Auto1 has grown rapidly in the past year. Revenues climbed 69 percent to 4.8 billion euros, as the Berlin-based company announced on Wednesday. Auto1 benefited from the increased number of cars sold, which grew by 31 percent in 2021 to 596,731 cars.
The autohero business – the sale of cars to private customers – grew at a disproportionately high rate. For the current year, Auto1 is significantly more cautious – also because of the effects of the Ukraine war on the consumer climate in Eastern Europe. The Auto1 share, which gave investors little joy after the IPO, was able to gain around three percent on Tuesday.
On Wednesday, however, the share collapsed by around twelve percent. In view of the high gasoline prices, the business model is shaky, it was said among dealers.
German Euroshop: The real estate investor specializing in shopping centers made less sales and operating profit in the past financial year, but returned to the profit zone in terms of net income. With a drop in sales of 5.5 percent to 211.8 million euros, earnings before interest and taxes (EBIT) fell by 5.4 percent to 152.5 million euros.
Above all, thanks to significantly lower valuation losses, the bottom line was a net profit for the year of 59.9 million euros, after a consolidated loss of 251.7 million euros in the previous year. The stock is almost unchanged from the trading day.
Indus Holding: After growth last year, the investment group wants to continue to grow. Because of the unpredictability of the war in Ukraine, CEO Johannes Schmidt made his forecast with reservations. “The economic effects are not foreseeable as of today,” he said. Therefore, possible negative effects are not taken into account. The stock fell 2.6 percent.
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