Dusseldorf The German stock market continues its winning streak in the new stock market month of November. The leading index Dax rose by up to 1.4 percent to 13,444 points on Tuesday. This is the highest level since September 13. The seventh daily win in a row is in prospect.
As a result, the stock market barometer falls back again. In the early afternoon, the plus is only 0.4 percent. Major indices on Wall Street turned negative shortly after opening. They had already closed in the red at the start of the week.
Trading on Tuesday is characterized by few external stimuli. In terms of companies and the economy, there are no relevant data from Germany on the agenda. In the US, some companies are reporting figures, including Pfizer, Uber and AMD.
As a result of the recent rally, the Dax initially settled above the psychologically important mark of 13,000 points. Since the annual low of 11,863 points reached on September 28, it has risen by more than ten percent.
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With a total increase of more than nine percent, the stock market month of October is the strongest month since November 2020 (12.75 percent), when the breakthrough in vaccines against the corona virus had given the overall market a huge boost.
The momentum of the upward impulse has slowed somewhat recently. “Many who want to buy are waiting for the next setback,” observes Thomas Altmann from the investment company QC Partners. “At the moment, those who have to buy are more likely to buy.” In this phase, however, there was hardly any major profit-taking – a sign of stability.
The daily trading volume in October averaged around 67 million shares with a recent downward trend. After the holiday month of August, this is the lowest monthly trading volume in the current stock exchange year.
This also suggests that the number of sellers on the market is currently comparatively small. Only a few buyers are enough to drive prices up. A higher number of sellers would mean higher volume and a lower price level.
The current rally is comparable to that between mid-July (from 12,434 points) and mid-August (to 13,948 points). During this phase, the average trading volume was even lower. Many investors stayed on the sidelines, while a manageable proportion of investors willing to buy pushed the price level up.
In retrospect, the fact that the Dax was supported by almost 2000 points in the following six weeks is surprising. However, coupled with the subsequent rally, this movement is further evidence that drastic swings in this stock market year are the rule rather than the exception.
>> Read here: The Invisible Rally – Under-the-radar companies are driving prices
With a view to the chart technology, the German stock market is now facing the next important decision. It is realistic that the current bear market rally – ie a phase of sustained price gains in an overall downtrend – will turn into a sustained trend reversal. That would be the case if the Dax were to sustainably settle above 13,500 points. In this case, the downward trend that has persisted since the beginning of the year would no longer be intact.
The 200-day moving average is more important and is closely watched by long-term investors. This average value of the past 200 trading days is currently 13,676 points.
Exceeding this level would be an important signal. The 200-day moving average is considered the central resistance. In none of its upward movements in the current year was the Dax able to exceed this threshold. Should this now succeed, from a chart technical point of view at least the foundation stone for a year-end rally would have been laid.
How big is the potential for setbacks?
It looks as if the fundamental situation would allow further price gains. The majority of companies have so far come through the current difficult situation in a robust manner. The latest company balance sheets have supported the upward momentum in the Dax.
US stock market expert Koch: “Wall Street nervously awaits Fed decision”
The risk of recession in Germany remains very high as a result of the energy crisis, although the data do not yet fully reflect this risk. The German economy grew by 0.3 percent between July and September compared to the previous quarter. Experts, on the other hand, had forecast a decline of 0.2 percent. Despite the high energy costs, private consumption fell less than expected.
The general expectation is that consumer restraint is likely to increase. At the same time, many factors point to falling corporate profits. Neither would be surprising given the developments of the past few months.
However, investors have had the opportunity to prepare for these scenarios for a very long time. The potential for a setback on the stock market could be less than feared.
What remains is the interest rate risk as a major burden. At 10.7 percent, inflation in the euro area was again much higher than expected in October and will remain at an extremely high level in the coming months.
The ECB, headed by President Christine Lagarde, is emphasizing like a mantra that the cycle of rate hikes is not over yet. “The goal is clear and we are not there yet. We will continue to raise interest rates in the future,” Lagarde said in an interview with Latvian news portal Delfi published on Tuesday. In view of the inflation rate of 10.7 percent, no market participant expected the interest rate hikes to end.
Individual values in focus
BP: The British oil company made its second-highest quarterly profit in the third quarter thanks to high oil prices. Adjusted net income rose to 8.15 billion US dollars (8.22 billion euros) in the months of July to September, as the group announced on Tuesday in London. That was significantly more than analysts had expected on average. As in the previous quarter, BP intends to pay a dividend of just over 6 US cents per share. The company also plans to buy back $2.5 billion of its own stock. The stock gives back its initial gains.
FMC: The analysis company Warburg Research has downgraded Fresenius Medical Care (FMC) from “hold” to “buy” according to preliminary quarterly figures and reduced annual targets and lowered the price target from 42 to 24 euros. The group issued a profit warning again on Sunday evening. The FMC share is at a discount of four percent at the end of the Dax.
DSM: Disappointing numbers are weighing on the shares of the Dutch chemical company. DSM missed expectations on the earnings side and lowered its full-year guidance for adjusted Ebitda. The titles lose more than one percent on the Euronext.
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