The leading German index is in a downward trend this year.
(Photo: Bloomberg Creative/Getty Images [M])
Dusseldorf The German stock market went up significantly on Wednesday. The Dax closed 2.2 percent higher at 13,828 points. In the course of trading, however, the leading index had even slipped into the red at times – as a direct reaction to the publication of US inflation data.
The high inflation there slowed down in April, but only slightly. Consumer prices rose by 8.3 percent year-on-year, the Labor Department said on Wednesday in Washington, after 8.5 percent in the previous month.
This amplifies inflationary pressures across the economy, weighing on budgets and prompting the US Federal Reserve to raise interest rates aggressively.
Tuesday was a very constructive trading day for the Dax because it did not fall below the important mark of 13,500 points in the long term. Although the closing price on Monday this week was 13,380 points, “sustainable” means that the following trading day must also be included.
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There are good arguments that the price slide on Monday to 13,380 points was at least a temporary low. At least the sell-off of stocks from the oil industry or stocks such as SMA Solar (minus 18 percent) or Rheinmetall (minus ten percent) at the start of the week are an indication of this.
Both stocks have risen sharply since the end of February and – apart from profit-taking – there was no reason for such a price slide. The appropriate stock market proverb is: The best are usually hit last.
Hope for end of lockdown in China
The background to this proverb: Investors hold on to supposedly attractive values until the end, until the pressure to sell becomes too great and they then give up. The result: Such values are usually the first to be bought again in an upward movement.
The easing on the stock markets is accompanied by the hope that two of the three major negative factors will be significantly reduced.
On the one hand, there is hope that the lockdowns in China will end soon. In the Middle Kingdom, the number of new Covid 19 cases is falling. In China and Hong Kong, this has brightened the mood on the stock exchanges significantly. If the important ports in China were to be completely reopened, that would be an important signal.
On the other hand, yields on the bond markets are falling, which in turn means the end of the sell-off, at least for the time being. Because when yields fall, the prices at which the bonds are traded rise in return.
The high US inflation data also caused a rollercoaster ride for bonds. The yield on the ten-year US Treasury bond hovered around the three percent mark. On Tuesday, the US bond yield peaked at 3.2 percent. The yield on the ten-year federal bond was 0.987 percent in the evening.
In contrast, the situation regarding the third major stress factor, the war in Ukraine, remains unchanged.
Despite today’s price gains, the downward trend in the Dax has remained intact since the beginning of the year. This line since the annual high of 16,285 points on January 5 is currently 14,124 points and, together with the 50-day line, which runs at 14,047 points, forms the first important hurdle on the way up.
Technical analysts are cautiously optimistic. For the chart technicians at HSBC Germany, the course of the past few trading days “often marks a short-term market turning point”. However, the Dax may no longer fall below the low of 13,380 points.
Look at the individual values
Bayer: The share slips by 6.2 percent and is the biggest daily loser in the Dax. The agrochemical and pharmaceutical group Bayer has suffered a setback in the US legal dispute over alleged cancer risks from the weed killer glyphosate. The US government on Tuesday (local time) advised the Supreme Court – the highest court in the country – not to accept a landmark case. The procedure could have a signal effect for many other US lawsuits. Legal risks worth billions depend on this for the Leverkusen-based Dax group.
Continental: The automotive supplier is suffering massively from the increased raw material costs. The profitable tire business alone saves the company’s quarterly results. By the close of trading, the stock was up 3.6 percent.
Thyssen Krupp: The steel group benefited from the rise in steel prices in the second quarter of its 2021/2022 financial year, but is struggling with high raw material costs. For the year as a whole, the profit forecast was raised to at least two billion euros. This gives the share an increase of around eleven percent. In view of the tense geopolitical situation, Thyssen-Krupp does not want to specify when the group will pay a dividend again.
Evotec: The stock fell 10.6 percent by the close. A trader described the sharp price losses as surprising. Although increased costs had depressed the results of the biotech company in the quarter. However, sales were better than expected. In addition, Evotec confirmed its outlook. In addition, the company had just expanded its partnership with the US pharmaceutical company Bristol Myers Squibb with a multi-billion dollar deal.
Today, Wednesday, two papers are traded with a dividend discount. Jungheinrich paid EUR 0.68, the closing price on Tuesday was EUR 22.36. The Rheinmetall share closed at EUR 181.90, and a dividend of EUR 3.30 was paid.
Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.