Dusseldorf The leading German index accelerated its descent after the US inflation data and slipped a further 150 points after a weak initial trading trend. The Dax is down 2.2 percent in the afternoon and is trading at 13,884 points, a drop of over 310 points. After turbulent trading after the ECB meeting yesterday, the leading index ended trading down 1.7 percent and stood at 14,199 points.
In the opinion of Ralf Schweden from the Landesbank Helaba, the “US central bank should feel confirmed that it will raise the key interest rate by 50 basis points next week and will continue to take aggressive action against inflation in July”. The move lifted the dollar index, which tracks the rate against major currencies, by as much as 0.6 percent on Friday to a three-and-a-half-week high of 103.95 points.
Before the publication, expert Jeffrey Halley from broker Oanda had expected a flight from risk across all asset classes – with the exception of the dollar – at such high values.
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But the reaction on the bond market after the price increase of 9.6 percent is small. The yield on a 10-year government bond was 3.047 percent before the release and has since fallen only slightly to 3.038 percent.
That was different on Thursday, when the European Central Bank further fueled the sell-off on the bond market with its interest rate decision. At 0.84 percent and 1.45 percent, the yields on federal bonds with a term of two and five years are currently as high as they were last in 2011. But at that time the key interest rate of the ECB was 1.5 percent.
For the capital market expert Thomas Altmann, this increase shows “what rapid and significant interest rate increases the markets are expecting”. The yield on the ten-year federal loan is currently 1.42 percent, close to its eight-year high.
In addition, yields on Italian and German government bonds are drifting apart again. Compared to the 1.40 percent for a German bond, this value is 3.75 for the Italian counterpart – a difference of 232 basis points. Before the ECB decision yesterday, Thursday, the difference was around 200 points. This increase shows that fears of a return to the euro debt crisis are back.
What the Dax chart technology says
The 14,000 mark not only has a psychological meaning for the Dax on the underside. From the beginning of May to the beginning of June this year, the German stock market barometer climbed around 1,300 points, from 13,380 to 14,709 points. Exactly at 14,044 points is half of this four-week increase.
Technical analysts refer to such a mark as a normal correction. The fact that the Frankfurt benchmark slipped below this mark on Friday is another negative signal.
Martin Utschneider, technical analyst at private bank Donner&Reuschel, had also expected the Dax to test this area on Friday.
On the upside, the focus is on the 50-day line, which shows the medium-term trend and is currently at 14,143 points. If the Dax exceeds this mark, that would be a first sign of relaxation.
Investor sentiment still gives hope that the situation will calm down because, to put it bluntly, there is a consensus among the pessimists. Many investment professionals expected prices to fall, and some speculated on them. This is positive because in such cases there is still sufficient capital for a re-entry.
Should the pros dissolve their short speculation again this Friday, that should provide some support for the leading German index. After evaluating the corresponding investor survey by the Frankfurt Stock Exchange on Wednesday evening of this week, behavioral economist Joachim Goldberg expected that the professionals would want to pocket their profits in the range of 14,150 to 14,250 points.
Real estate and industrial stocks are down significantly on today’s trading day. Vonovia papers lose 3.7 percent, Tag Immobilien even 4.7 percent. In industrial stocks, Heidelberger Druck led the list of losers with a minus of 4.3 percent. Most of the other “old economy” stocks, i.e. securities from traditional industries, are also losing more than the market as a whole.
Look at individual values
Bayer: The group has won another lawsuit in the USA about alleged cancer risks from the weed killer glyphosate. The jury of a court in Kansas City, Missouri ruled in favor of the Dax company on Thursday and ruled that the herbicide was not to blame for plaintiff Allan Shelton’s illness. However, the stock fell 0.9 percent.
Bayer took on major legal risks in 2018 with the $60 billion purchase of US seed giant Monsanto, which produces the controversial weed killer Roundup containing glyphosate. The agrochemical and pharmaceutical company has now prevailed in three glyphosate processes in a row in the USA, but previously also lost three processes in a row. The Leverkusen team is faced with numerous other similar US lawsuits.
GFT Technologies: The shares lose around six percent. The private bank Berenberg had previously lowered its investment rating for the IT service provider from “buy” to “hold” for valuation reasons and sees little further scope for price increases.
Dividends: The following papers are traded with a dividend discount this Friday. Brenntag (70.68 euros closing price Thursday, 1.45 euros dividend), DWS Group 31.24 euros, 2.00 euros), Instone Real Estate (13.06 euros, 0.62 euros), Traton (16.96 euros , 0.50 euros)
Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.