Dusseldorf At the end of the week, a day of losses is emerging on the German stock market. The leading index Dax was down 1.1 percent on Friday morning at 15,038 points. The biggest losers are bank stocks: Deutsche Bank shares lose more than eight percent, Commerzbank shares more than four percent.
On Thursday, the protection against payment defaults on Deutsche Bank bonds rose sharply. According to data from S&P Capital, the CDS hit 173.64, up from around 142 previously. This is the largest value in Europe after the Swiss crisis bank Credit Suisse and the Greek Eurobank Ergasias.
However, not only German banks are under pressure, but the entire industry. The sector index “Eurostoxx Banks” lost almost four percent. Statements by US Treasury Secretary Janet Yellen are considered to be the trigger for this. On Thursday evening, the bank again made reassuring statements about the banking situation, but failed to provide a blanket guarantee for deposit protection.
The US bank regulator and the Treasury Department are ready to take on comprehensive deposit insurance for other banks, as they did with the failed Silicon Valley Bank and Signature Bank. However, it still failed to provide a blanket guarantee for bank balances in US banks above the current limit of $250,000 that bankers and Wall Street were hoping for.
In the case of the Dax, however, today’s development should not come as a surprise against the background of the current stock market week: the Dax was up three percent at the end of the day on Thursday, and since the week’s low on Monday the plus was even more than five percent. This puts the Dax in the overbought area – it has risen too quickly too much.
Portfolio manager Thomas Altmann from asset manager QC Partners therefore considers the current profit-taking to be normal: “In this turbulent environment, some certainly want to go into the weekend with less risk.” This trend had already existed on Friday of the previous week, when the Dax lost 1.3 percent .
Dax: Seasonality speaks for further rising prices
However, one aspect speaks in favor of further rising prices: seasonality. Along with October, November and December, April is one of the best stock market months for the Dax.
Jörg Scherer, analyst at HSBC Germany, sees the dividend season as a possible explanation for this. In April, many companies distribute their profit sharing to shareholders. “The high phase of distributions ensures additional liquidity and, as a result, an increased need for reinvestment,” says Scherer.
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Based on the data since the beginning of the millennium, he has examined this “seasonal anomaly” more closely. “It is noticeable that the share barometer already shifts up a gear at the end of March and the cyclically favorable phase lasts until the beginning of May,” writes the expert in his daily newsletter “Daily Trading”.
Since the year 2000, the Dax has risen by an average of almost five percent in April. Eight years of price losses in the corresponding period are offset by 15 cases in which the index was able to rise. This corresponds to a hit rate of 65 percent.
Bonds: limited potential for falling yields
Bond yields have recently fallen significantly since the beginning of March: on the relevant ten-year US government bonds from over four percent to around 3.4 percent, on ten-year federal bonds from 2.7 to around 2.1 percent.
The reason for this is that potential interest rate cuts by the major central banks are already being priced into the market, explain Helaba’s Ralf Runde and Ulrich Wortberg. Both the US Federal Reserve and the European Central Bank left the option open for further interest rate hikes. “This could indicate that the potential for falling returns is limited,” write the Helaba experts in their current market assessment.
The US monetary authorities emphasized that they suspect that the stress on the financial markets is leading to a tightening of credit conditions and is therefore making part of the interest rate hikes superfluous. However, the more the current financial market stress decreases, the more moderate the tightening of credit conditions is likely to be.
As a consequence, the market would have to price in further Fed rate hikes, explains Commerzbank analyst Ulrich Leuchtmann. In this case, yields would rise again.
Look at individual values
Evotec: The biotech announced this morning that it had received a $6.6 million grant from the Bill & Melinda Gates Foundation for drug discovery in the field of tuberculosis. Evotec shares lose 0.7 percent in the MDax.
secunet: The cyber security specialist wants to continue the series of record sales in 2023. On Friday, Secunet announced an increase to around 375 million euros. On the other hand, the operating profit will only increase slightly from 47 to 50 million euros. The share rose by two percent in the SDax.
Tui: The tourism group has announced a capital increase of 1.8 billion euros. The aim is to reduce the WSF’s stabilization measures and to reduce the KfW credit line in order to strengthen the consolidated balance sheet. Since the capital increase dilutes the value of the existing shares, Tui shares lose more than eight percent.
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