Dusseldorf The German stock market is proving to be resilient in view of the high price losses in US technology stocks. After significant losses at the start of trading, the Dax was again unchanged at 13,204 points in the afternoon.
The stock market barometer ended yesterday, Thursday, after a varied trading day, up 0.1 percent at 13,211 points. Each day this week has marked a new high in the rally since late September, which is now up 1400 points.
In view of the current momentum, a weak start to trading like this Friday should not come as a surprise. A rebound to the round mark of 13,000 points would be common.
Even a retest of the 50-day line at 12,740 points would not change the current rally mode. For the past week, it has been another key resistance on the way up.
In view of the stock market tremors of the US technology companies, the leading German index is holding up comparatively well. Because the US reporting season is leaving dramatic marks: After the 24 percent drop in the share price of the Facebook group Meta due to weak numbers, the Amazon share is doing similarly this Friday. The Amazon paper loses more than 14 percent on the German stock market. The minus of 0.2 percent is only limited for the Apple titles. The iPhone group is probably a winner in this crisis.
Bitter realization and amazing discrepancy
A look at the development of the various stock market indices also shows an astonishing discrepancy. Since the annual low of the German leading index at the end of September with 11,862 points, both the Dax eleven percent and the Dow Jones index have risen by eight percent. The Nasdaq technology index, on the other hand, lost 2.5 percent in value, and at times the minus was even eight percent.
In the past twelve months, the Nasdaq has lost more than 30 percent in value, while the Dax has only lost around 15 percent and the Dow only ten percent.
The stock market tremors of the US tech companies and the discrepancy in the performance of the various stock market indices allow two conclusions: On the one hand, the trend reversal away from growth stocks and towards industrial stocks is apparently far from over.
On the other hand, the bitter realization remains for private investors: the hope that the high growth will take the prices of technology stocks back to the former highs of late 2021/early 2022 is likely to be disappointed. You only have to look at the stock market years since the turn of the millennium, when the so-called technology bubble burst.
To understand: look at the stock market history
Anyone who bought Amazon shares at the highs of 1999 or 2000 had to wait until the end of 2009 for the shares to be listed at a similar level again. In the worst case, shareholders had to complain about a loss of more than 90 percent. Many investors have probably lost their nerve and sold in such phases.
Many papers have still not managed to reach the highs of 1999 and 2000. This not only applies to smaller technology stalls, but also to large corporations such as Cisco, which is currently listed in the venerable Dow Jones Index.
In 2000, the company was briefly the most expensive company in the world with a market value of around 555 billion dollars. The stock price climbed to over $82 on March 30, 2000. But the price never reached this level again.
In early 2022, the price was around $62, its highest level since the turn of the millennium. A share currently costs around $44.
Investors should not transfer comparisons with developments from earlier stock market years 1:1 to the current situation. Nevertheless, they show a tendency that investors should take into account when making their decisions.
Rate cut bets are increasing
As expected, the ECB’s central bankers raised the key interest rate yesterday by 0.75 percentage points to two percent. However, the choice of words in the press release on the interest rate decision defused investors’ fears of a future sharp hike. This can be seen in the expectations for the upcoming rate hikes.
For December there is now an equal distribution between 25 and 50 basis points, previously there was between 75 and 50 basis points. According to Jochen Stanzl from the online broker, the peak of 3.0 percent for the key interest rate is a long way off; 2.5 percent is now more likely.
The monetary policy outlook has also changed on the other side of the Atlantic. Financial market participants are increasingly assuming that the days of very significant interest rate hikes in the USA will soon be over. Data released on Thursday provided new signs that the Fed’s intended economic slowdown is gaining momentum.
Expected: Another rate hike by the Fed
However, the Fed is still expected to announce a fourth rate hike of 0.75 percentage points at next week’s meeting. However, bets in interest rate futures markets indicate that December should be just another half point up. A maximum increase of 0.5 points is expected in the two subsequent sessions.
Bets on rate cuts in the second half of 2023 also increased. According to the so-called Fed Watch tool of the Chicago derivatives exchange CME, a majority of professionals now expect the first interest rate cuts from September 2023. The scenario: by the June or July 2023 meeting, the US key interest rate should be in a range between 4.75 up to five percent, according to expectations. Summer break is in August.
After the September meeting, the key interest rate is expected to fall back to 4.5 to 4.75 percent. Every third futures market professional expects that. Another 20 percent even see a range between 4.25 and 4.5 percent. Just a week ago, a majority expected no changes for the September 2023 session.
Look at individual values
Volkswagen: Higher deliveries and better sales prices have caused the car manufacturer’s profit to rise sharply. However, the costs of Porsche’s IPO and the write-downs due to the suspension of business in Russia impacted earnings by a total of 1.6 billion euros.
Due to ongoing supply bottlenecks and the looming recession, Europe’s largest car company has become more pessimistic when it comes to sales: instead of growth of five to ten percent, the group now expects deliveries to be only in the magnitude of the previous year. The stock fell 3.2 percent.
Porsche: The sports car maker earned significantly more in the first nine months and was able to increase profits much faster than sales. The operating profit rose to a good five billion euros. This means that Porsche remains the most profitable German manufacturer. The stock loses 2.8 percent.
Per seven Sat 1: The television group cut its profit expectations for the third time in three months. The stock plummeted 4.9 percent, dragging rival RTL’s titles down 3.5 percent.
Compugroup: The software provider, which specializes in medical practices and hospitals, has shown itself to be more pessimistic for the current year. The reason is the postponement of projects to 2023. The share falls 11.7 percent.
Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.