Frankfurt After a four-day winning streak, the Dax suffered a setback on Tuesday: Rising oil prices and record price increases in the euro zone reminded investors of old inflation concerns. Also burdened by a weak start on Wall Street, the leading German index went 1.3 percent lower at 14,389 points from trading.
Market experts are increasingly worried about inflation. Ulrich Stephan, chief investment strategist for private and corporate customers at Deutsche Bank, says: “The risk of a wage-price spiral can no longer be dismissed out of hand.”
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Jörg Krämer, chief economist at Commerzbank, does not understand why the European Central Bank (ECB) wants to wait until the end of the third quarter to abolish its negative interest rates. After all, there is a new peak in inflation and inflation has risen again beyond the more expensive energy and food items.
Embargo makes the price of oil rise
The oil price, which rose again on Tuesday, also weighed on the mood. Crude oil prices rose sharply after EU-27 leaders agreed late Monday on a wider embargo on oil imports from Russia.
>> Read here: EU countries agree on an oil embargo against Russia – but not a complete one
US WTI oil for July delivery rose 3.2 percent to $118.80 a barrel, the price hitting its highest level in almost three months. The corresponding price for Europe’s leading North Sea variety, Brent, rose by two percent to $124, also approaching a three-month high. Jochen Stanzl from CMC Markets says: “The last thing the stock market needs right now is a price explosion in the area of 140 or 150 US dollars.”
The rise in oil prices gave oil company shares a boost. The papers of companies such as BP and Shell rose by more than one percent each, that of the French oil company Total by more than half a percent. That’s less than the price of oil, but oil stocks are all at their highest levels in several years.
On the other hand, investors divested themselves of aviation stocks – after all, fuel is a major cost factor. Shares in companies such as Lufthansa, the British Airways parent IAG or the low-cost airlines Easyjet and Ryanair fell by up to four percent at times.
Bond yields rise significantly
Concerns about inflation are also reflected in the bond markets. Yields, which are developing in the opposite direction to prices, are picking up again. The yield on the 10-year US Treasury bond rose very sharply by 0.100 percentage points to almost 2.9 on Tuesday. There was no trading in the US on Monday due to the holiday. At the beginning of May, the ten-year US yield read even higher at 3.13 percent.
On the other hand, the yield on ten-year German government bonds, which is relevant for the euro area, at 1.12 percent again clearly approached the eight-year high of 1.13 percent reached a few weeks ago. Yields rose more than 0.06 percentage points on Tuesday after rising 0.09 percentage points on Monday.
Looking at the stock markets, Ralf Fayad, who writes about technical analysis for the major French bank Société Générale, does not find the Dax’s breather surprising. He sees the next resistance zone for the Dax at 14,589 to 14,603 points. As support marks, he accounts for 14,510 and then 14,464 points. Below that, a more significant downward correction towards 14,300 points should be planned.
>> Read about this: Chart technique: The 8100-point mark suddenly becomes important for the Dax
Even that would not be dramatic at first. Since its two-month low of 13,381 points on May 9, the Dax has finally risen sharply amid fluctuations. The recovery has recently gained strength.
In the last two weeks of May, investors always quickly took profits when the Dax was above 14,000 points. Since last Wednesday, however, this mark has been clearly exceeded.
How Far Will the Bear Market Rally Go?
However, many private investors have largely missed the recent upswing. This emerges from the weekly Handelsblatt survey Dax sentiment (Read the analysis here).
Only one in four respondents expects prices to rise in the next three months. Just over a third expect prices to fall. A little more are expecting a sideways movement. So there is no clear market opinion as to how the courses will develop.
Technical analysts characterize the rebound as more of a bear market rally, ie a situation in which prices rebound significantly over a shorter period of time before the downward trend resumes with a longer period of falling prices (bear market). Since its record high of 16,290 points in mid-November, the Dax has lost more than ten percent, and at the beginning of March it was even more than 20 percent below its record high.
Individual values in focus
hellofresh: After the share of the cooking box supplier rose almost ten percent on Monday, investors took at least some profits on Tuesday. The stock ended trading down 3.4 percent.
The share of the online food supplier Delivery Hero fell even more, namely 3.5 percent, making it the biggest loser in the Dax. Since the beginning of the year, the Hellofresh share has lost around half of its value, and the Delivery Hero share has lost more than 60 percent.
>> Read about this: at Delivery Hero, Hellofresh and Zalando meet traders with long-term investors
Lanxess: The shares of the specialty chemicals group stayed at the top of the MDax with an increase of more than eleven percent. Investors obviously like the fact that Lanxess, together with the financial investor Advent, is taking over the plastics business of the Dutch chemical company DSM for around 3.7 billion euros. This is to be brought into a new joint venture.
DSM: The DSM share even rose by almost 13 percent at times in Amsterdam, and the paper was up eight percent in the evening. This is also due to the fact that DSM announced a multi-billion dollar merger with the Swiss fragrance and flavor manufacturer Firmenich parallel to the Lanxess deal. Analysts at Citigroup believe that this will create a new industry superpower. This in turn weighs on the prices of other fragrance and flavor manufacturers. In the Dax, for example, Symrise shares lost more than three percent.
Eagle groups: The shares of the ailing real estate group gained around eleven percent, but have lost around two-thirds of their value since mid-March. According to its own assessment, Adler performed solidly in day-to-day business in the first quarter. Net rental income fell by almost 16 percent compared to the same period of the previous year. Operating profit (FFO1) was eight percent lower than a year earlier.
Unilever: Unilever stock, which has fallen by up to 15 percent this year, rose by almost nine percent on Tuesday. The arrival of billionaire activist investor Nelson Peltz on Unilever’s board of directors gives investors hope that the pressure on the restructuring of the consumer goods group will increase after the takeover of British pharmaceutical company Glaxo-Smithkline fell through earlier this year.
Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.