Frankfurt The Dax did not make it into the profit zone on Wednesday. The leading German index closed the trading day down 1.5 percent at 14,606 points. After the publication of the higher-than-expected German inflation rate, the index slipped to as much as 14,559 points.
On Tuesday, the leading index exceeded the 14,600 point mark for the first time since the Russian war of aggression against Ukraine began, which is why investors are focusing on it. The biggest Dax losers on Wednesday included Delivery Hero and Zalando, the shares that had risen the most since the beginning of the week.
Other European stock market indices also lost significantly. Wall Street’s major indices also opened lower, offering no support to Europe’s bourses.
The inflation rate in Germany rose by 7.3 percent in March and is at its highest level since autumn 1981. The main reason for the most recent jump in prices is the massive rise in energy prices as a result of the war in Ukraine. On average, economists had expected inflation to rise from 5.1 to 6.3 percent.
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The stock market lost any hope given the peace talks between Russia and Ukraine and Russia’s announcement that it would significantly scale back its combat operations on the northern front near Kyiv and Chernihiv. On Tuesday, these hopes had caused the Dax to rise by 3.5 percent to 14,952 points and left trading at a level of 14,820 points.
Uwe Streich, stock analyst at Landesbank Baden-Württemberg, fears that the stock markets have already risen too far. “There might be too much optimism in the movements.” Jeffrey Halley, market analyst at broker Oanda, also believes that the stock markets do not reflect that “nothing really changed” during the war.
Doubts about the Russian troop withdrawal burden
Doubts about the Russian troop withdrawal arose overnight. The US Department of Defense sees the Russian announcement as a tactical maneuver and warns of a new military offensive in other parts of the country. In his nightly message, Ukrainian President Volodymyr Zelenskiy also spoke of Russia’s lack of trustworthiness.
Investor concerns about the oil price were even clearer than on the stock market. Since the beginning of the war, the price of a barrel of North Sea Brent for delivery in May has risen by more than 18 percent.
The oil price fluctuates significantly. On Tuesday it had fallen by six percent to below $105 a barrel at its peak, but later rose again to $111.50. Oil rose to just under $114 on Wednesday.
“Investors in the oil market seem to have doubts as to whether the Russian government will really withdraw troops,” says IG market analyst Christian Henke. According to traders, investors are now expecting new sanctions from the West against the oil exporter Russia. The prospect of a tight supply is driving prices.
In addition, the news about the gas supply unsettled investors. Against the background of the Russian war of aggression against Ukraine, the German government is preparing for a significant deterioration in gas supplies. Federal Minister of Economics Robert Habeck (Greens) therefore announced the early warning level of the gas emergency plan on Wednesday in Berlin. The EU Commission has been informed. On the stock exchange, this put a particular strain on the chemical industry, which relies on oil and gas as the raw materials for many chemicals. Accordingly, the shares of BASF and Covestro lost above average in the Dax.
>> Read here: Early warning level declared – These industries would be hit hardest by a gas supply stop
The Dax was not only hit by the inflation data on the part of the economy. Sentiment in the euro zone economy plummeted to 108.5 in March from 113.9 in February as a result of the war. Experts surveyed by Reuters had only expected a drop to 109.0 points. According to estimates by the German Institute for Economic Research (DIW), the German economy is heading into a recession.
Individual values in focus:
Continental: The prospect of potential anti-competitive practices in the Indian market weighed on shares in tire maker Continental. The titles were the weakest Dax value with a minus of more than six percent. The Reuters news agency reports, citing people with direct insight into the situation, that the Indian competition authority is investigating the offices of the German group and the manufacturers Ceat and Apollo Tires. Among other things, it is about the suspicion of unfair business practices.
Encavis: The solar park operator’s shares rose by 9.4 percent to EUR 18.99, the highest level in almost thirteen months. Encavis scored with a positive outlook for the current year. The solar park operator expects sales to increase by 14 percent to more than 380 million euros. Operating earnings per share are expected to rise to EUR 0.51 from EUR 0.48 in the previous year. In addition, the SDax company is benefiting from the new boom in renewable energies sparked by the war.
beat: The shares of the Stuttgart office furniture mail order company reacted positively to optimistic forecasts and gained around seven percent. The company, which is also listed in the SDax, wants to increase sales by 70 percent to two billion euros by 2025 – also with acquisitions.
Eckert & Ziegler: The radiation and medical technology company presented record results last year, but cannot benefit from them on the stock exchange. The stock slipped 2.3 percent, down 34 percent year-to-date.
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