Dusseldorf After the events of the weekend, expectations of a quick end to the war have diminished. And the sanctions against Russian oligarchs and the Russian economy as a whole appear to be having an effect. This mix initially caused the Dax to slip to 14,107 points, a drop of around 560 points. But soon buyers took action again. The leading index is now at 14,250 points, down 2.2 percent.
A comparison with the Russian financial markets shows that the EU sanctions are balanced in such a way that they maximize the pressure on Russia and minimize the damage to the West. Because in Russia the stock market remained completely closed. This focused the sell-off on overseas-listed funds of Russian stocks. The ETFs from JP Morgan, iShares and Van Eck fell by up to 25 percent. The ruble plummeted against the dollar. So far, the leading German index has been able to stay well above the lows that were reached on the day after the first day of the war.
Jochen Stanzl, chief market analyst at online broker CMC Markets, is certain: “It seems as if the measures have succeeded in isolating Russia financially without promoting contagion effects on the western markets.”
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However, in view of the events surrounding the Ukraine war, it is currently impossible to evaluate stock markets fundamentally. In such cases, technical analysis can provide initial clues.
So far, with today’s daily low of 15,107 points, the psychologically important mark of 14,000 points has not even been tested. It is particularly relevant for one reason: even on the day after the start of the war, last Thursday, the Dax closed at 14,052 points above the mark. Any closing price below that would be a renewed sign of weakness in the leading index.
The so-called “war low” on Thursday is 13,807 points – it is also the weakest listing of the entire stock exchange year. Any price below this mark could trigger further waves of sell-offs. The entire zone between 13,800 and 13,500 points is extremely important for the medium-term development, there is a massive bundle of supports – including the highs from 2018 and 2020 with 13,596 and 13,795 points.
For Martin Utschneider, technical analyst at the private bank Donner & Reuschel, the focus today is in the range of 14,000 to 13,566 points. In his opinion, the said 13,566 points could bottom out. But we still have to wait and see. “The risks and uncertainties are – as of now – too high,” he wrote before the stock market opened.
Despite the significant price losses on Monday, investors should not panic. According to sentiment expert Stephan Heibel, after evaluating the current Handelsblatt survey Dax-Sentiment, the current prices and the valuation level achieved with them are the result of maximum panic and uncertainty. “According to the sentiment analysis, we can assume that the share prices called up these days will be outbid again in a few months, maybe weeks,” says Heibel.
Current events are best described with an American proverb: “Tops are a process, bottoms are an event” – while record highs are a longer time-based process, new lows often depend on just one event. The positive view of the proverb: Without a special reason or trigger, there are simply no bargain prices.
Bullish defense stocks
The shares of Hensoldt and Rheinmetall are developing most spectacularly in the current situation. The Hensoldt share rose by almost 85 percent at the start of trading and is currently still around 40 percent up. Rheinmetall shares climbed 30 percent. At 160 euros, the manufacturer of the “Leopard 2” tank was at times quoted higher than ever.
Because of the Russian attack on Ukraine, the federal government wants to invest heavily in armaments. Federal Chancellor Olaf Scholz announced that a special fund of 100 billion euros is to be set aside in the 2022 federal budget, from which the needs of the Bundeswehr are then to be financed for years to come.
The Düsseldorf-based company Rheinmetall has two divisions: it is a supplier to the automotive industry for everything to do with engines, and it builds “threat-based security technology” – which also includes tanks. Separating the two business areas has been discussed for a long time, but the group management has so far been able to successfully resist this.
The share has repeatedly bounced off the 115 euro mark for years. Last week it jumped from 88.50 to 106 euros, an increase of 20 percent. On Monday morning it opened at around 160 euros, but then quickly fell back to around 130 euros.
In London, Bae Systems’ stock rose nearly 15 percent to a record high of 749.4 pence, heading for its biggest one-day gain in 35 years. In Paris, Thales shares rose about 16 percent.
In the hope of an accelerated energy transition, investors are investing in green electricity stocks. The shares of the wind turbine manufacturer Vestas headed for the largest daily gain in more than seven years on Monday in Copenhagen with an increase of almost 13 percent at times. The title of the rival Nordex increased by about 18 percent, as strong as it was a year and a half ago. Siemens Gamesa advanced a good eleven percent in Madrid. The papers of the green electricity providers Orstedt and EDP Renovaveis gained up to ten percent.
Rubles and index exchange-traded funds plummet
Against the background of the Ukraine war, Deutsche Börse suspends trading in Russian securities. This applies with immediate effect. The Moscow Stock Exchange is even closed.
According to a report by the Norwegian public broadcaster NRK, the country’s pension fund had invested the equivalent of 2.5 billion euros in Russia at the turn of the year. The Norwegian central bank has now been instructed to stop all investments in Russia immediately and to withdraw the fund from the country.
It is about the shares in 47 companies and government bonds. With a total volume of $1.3 trillion, the fund is the world’s largest sovereign wealth fund. He invests the income from the country’s oil and gas business for the benefit of future generations. In addition to withdrawing the fund, Oslo also wants to join the EU sanctions against Moscow and support Ukraine with money for humanitarian aid and military protective equipment, the government announced on Sunday evening.
On the other hand, German Bunds were very popular as a “safe haven”. This pushed the yield on 10-year stocks down to 0.2 percent.
The ruble has fallen to a record low due to tightened sanctions. On the EBS trading platform, it fell by almost 42 percent during the night. At times, 119 rubles had to be paid for one dollar.
>> Read here: Moscow postpones the start of the stock exchange, the ruble falls to a record low – investors flee to gold
The exchange rate against the greenback is currently around 100 rubles. The Russian central bank is reacting to the currency crisis resulting from western sanctions with a drastic interest rate hike. The key interest rate will rise from 9.5 to 20 percent, as the currency watchdogs announced in Moscow on Monday. At the same time, they signaled their readiness for further increases.
Meanwhile, the Central Bank of Russia banned foreigners from selling Russian securities. “The central bank wants to prevent both a sell-off on the Russian securities markets and massive RUB weakness,” explains Ulrich Leuchtmann, currency analyst at Commerzbank. “In the future, every foreigner who is considering investing in Russian securities will have to take into account the risk that he will not be able to get out of this position by order of the central bank,” the exchange operator said.
Oil and gold prices are rising
The growing fear of supply disruptions is driving the price of oil up again. The Brent variety from the North Sea rose by five percent to $102.72. Because of the war in Ukraine, more and more investors are looking for protection in the “safe haven” of gold. The precious metal is heading for its biggest one-day gain in about a year, up 2.2 percent to $1,928.32 an ounce. At the same time, palladium rose in price by almost eight percent to $2551.50 a troy ounce.
Fear of supply disruptions in the wake of the Russian attack on Ukraine has caused wheat prices to jump the most in almost 13 years. US futures are up more than 9 percent to a nine-and-a-half-year high of $9.2025 a bushel. Russia and Ukraine are important wheat exporters.
Look at the individual values
Deutsche Bank/Commerzbank: After several Russian banks were excluded from the Swift international payment system, Western European institutions are coming under selling pressure. Deutsche Bank and Commerzbank shares fell 9.2 percent and 7.8 percent, respectively, and are among the biggest losers compared to other European banks.
At the same time, the European banking index slipped. Among the biggest losers were those institutes with a large business in Russia. The shares of the Austrian Raiffeisen Bank fell by up to 18.5 percent to a one and a half year low of EUR 13.90. “The exclusion of Russian banks from international payment transactions means that these financial institutions can no longer settle their liabilities to their European creditors,” said Thomas Gitzel, Chief Economist at VP Bank. With EU-wide 75 billion dollars, these outstanding debts are manageable.
BP: The oil major is the largest foreign investor in Russia and announced it would divest its stake in oil giant Rosneft, which would result in losses of up to $25 billion. The oil company’s shares then fell by around six percent.
Renault: The stock fell 11 percent. The company controls the Russian automaker Avtovaz, the maker of the Lada SUVs.
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