Dusseldorf After three days of profits in a row, skepticism dominates the German stock market. On Wednesday, the Dax increases its losses and is 1.5 percent lower at 13,700 points in the afternoon.
In the past few days, the leading index had worked its way up in very small steps, so that the 14,000 point mark was within reach again. The Dax was last above this on June 10th.
The recent movements are accompanied by a strongly below-average trading volume. According to data provider Refinitiv, only 51 million Dax shares were traded on Tuesday, with around half of that value being reached in the last two hours of trading.
Only 38 million Dax papers changed hands on Monday. The average for the past month is 63 million pieces.
The low volume underlines that many investors are currently acting cautiously. Those who are active in the market are increasingly on the buyer side. In addition, both private and institutional investors have recently increasingly hedged against price risks.
The most important date on Wednesday is not until the evening. Then the US Federal Reserve will publish the minutes of its most recent interest rate meeting at the end of July. Investors are hoping for clues as to the speed and scope at which monetary authorities intend to raise interest rates further. “The hope of the market participants is that the US Federal Reserve will be a little lenient with regard to future interest rate hikes,” said analyst Christian Henke from brokerage house IG.
In July, the Fed raised interest rates again by three-quarters of a percentage point. It is now in a range of 2.25 to 2.5 percent. Further rate hikes are likely given the very high inflation in the country. Recently, the price pressure in the USA has weakened slightly. Consumer prices rose by 8.5 percent in July, after 9.1 percent in the previous month. However, observers warn against too much optimism.
In Great Britain, on the other hand, the price pressure has intensified. Inflation was 10.1 percent in July, the statistics office announced on Wednesday morning.
Market picture delivers positive signals
Investors get stability from the general market picture. Because the Dax is currently in an intact upward trend. Since mid-July, the highs of a trading week have always been higher than the highs of the previous week, while the lows of the week have always been higher than the lows of the week before.
In the middle of the week, some indicators suggest that this development will continue. The Dax has already exceeded the highest listing of the previous week. Now it must not fall below 13,455 points for the rest of the week, the lowest level of the past trading week – an extremely likely scenario.
Investors on the German market seem to follow the well-known stock market proverb “The trend is your friend”. The proverb signals that investors should not go against an intact trend.
Uptrends usually last longer than downtrends. On the other hand, the movements are more moderate, because a slide down is more dynamic than overcoming resistance on the way up.
>> Read here: Bear Market Rally or New Bull Market? Why fund managers mistrust rising prices
The last uptrend of this type was between mid-May and early June. During this time, the Dax rose to 14,709 points (highest on June 6). A sell-off then set in, causing the index to fall back to 12,400 points.
More interesting is an uptrend last fall. This movement began in early October 2021 and ended in mid-November: On November 18, the Dax reached a record high of 16,290 points. The consolidation that followed was moderate, with the leading index again reaching its record level by mid-January.
The market conditions are no longer comparable to the situation in autumn 2021 given the monetary policy turnaround that has been initiated, the high risk of recession and the general consequences of the war. But a look at the medium-term history can still strengthen the positive mood.
Raw materials: stabilized oil, zinc and aluminum more expensive
Oil prices have stabilized again after their recent losses. A barrel (159 liters) of the North Sea Brent cost 93.19 US dollars on Wednesday for delivery in October. That was 85 cents more than on Tuesday.
The price of a barrel of West Texas Intermediate (WTI) for September delivery rose 91 cents to $87.44. On the oil market, concerns about weaker demand had weighed on prices recently, as did the vague prospect of Iranian oil returning to the world market.
The fear of supply bottlenecks is meanwhile driving the zinc and aluminum prices on the Chinese futures exchanges. The triggers are production interruptions in Europe and China. The most-traded zinc contract in September on the Shanghai Futures Exchange rose 4.6 percent to hit a two-month high of 25,935 yuan a ton. Aluminum rose 3.3 percent to 18,570 yuan per ton.
Individual values in focus
Unipers: Germany’s largest gas importer made a loss of more than twelve billion euros in the first half of the year. The high losses of the group will be largely passed on to German households from October. Nevertheless, Uniper expects losses for a long time to come. The share loses nine percent in the MDax to just seven euros.
Vonovia: Real estate values are coming under pressure across Europe. The Dax value Vonovia loses 4.4 percent. The discounts are even higher for TAG Immobilien or Grand City Properties.
Sanofi: The French pharmaceutical company ends the development program for its breast cancer drug Amcenestrant. The active ingredient missed the defined goals in a phase III late-clinical study, as the company announced on Wednesday. An independent review committee recommended stopping the study. All ongoing clinical trials with amcenestrant would be halted. There were no safety concerns. The share lost more than four percent in Paris and is the weakest value in the leading index.
Cinema World: The world’s second largest cinema operator suffers from a lack of blockbusters. The lack of film hits is affecting the income, it said on Wednesday. That will probably last until November. Cineworld warned that shareholders would have to reckon with a dilution of their shares. The London-listed share collapses by more than half.
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