Dusseldorf At the end of the week, a day of losses is emerging on the German stock market. The leading index Dax was down 1.4 percent on Friday morning at 14,991 points. The biggest losers are bank stocks: Deutsche Bank shares lose almost nine percent, Commerzbank shares almost six 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.
This fuels concerns about the general stability of European banks. The sector index “Eurostoxx Banks” lost four percent.
There are also statements by US Treasury Secretary Janet Yellen. 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.
The ongoing concerns about the global banking system are therefore weighing on the mood, says analyst Jochen Stanzl from online broker CMC Markets: “It will be weeks before the damage from the bank earthquake can be assessed. And there remains a vague feeling among investors that the resulting news will not be very good.”
A string of poor PMIs from France and Germany and disappointing GDP numbers from Spain amplify the downside. 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 .
Which brands are important now
Friday’s losses also closed Tuesday’s upside gap at 14,980 points. Such gaps occur when the low of a trading day is higher than the high of the previous day. That was the case on Tuesday. If such an upside gap is not closed quickly, it will become support. The Dax is currently working on this support.
Below that, the area around 14,800 points has recently proved to be an important support. Buying interest has always set in here in the past few weeks when prices have dropped.
On the upside, the mark of around 15,300 points is important. Here is the moving average price of the past 200 days, showing the long-term trend. This area is a resistance: If the Dax rises above it, i.e. on a daily basis and on the following day, that would be a sign of further price gains.
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.
>> Read about this: Correction now? Six lessons from past stock market yearsn
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.
Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.