Frankfurt A directional decision is likely to be made on the German stock market this trading week. With the US Federal Reserve, the European Central Bank and the central banks of Japan and China, four important interest rate decisions are pending.
Accordingly, capital market expert Thomas Altmann from the fund house QC Partners says: “It is quite possible that this week will be the decision on the direction of the stock market in the coming weeks”. After evaluating the current investor survey, the experts at the analysis company Sentix also determined: “Instead of a good mood, we measure … an increasing irritation. This usually subsequently leads to increased market volatility.”
However, there is little sign of increased fluctuations on Monday. The Dax was listed at 16,028 points in the first hour of trading, an increase of 0.5 percent compared to the closing price on Friday.
Two points speak for a directional decision: On the one hand, there is the duration of the sideways movement. The leading German index has been moving sideways for more than eight weeks, a rather unusually long period.
Apart from the four-day excursion above the 16,000 point mark with the new record high, the Dax moved in a range of just 400 points – 15,625 points on the lower and 16,125 points on the upper side. Including the record high, this range is only around 500 points.
For Jörg Scherer, technical analyst at HSBC Germany, it is therefore clear: “In order to secure the price gains that have accumulated in the course of 2023 so far, this zone offers itself as a strategic hedge”.
In addition, this range is even narrowing. In the past week of trading, the Dax was only 1.3 percent between high and low. “That can hardly be surpassed in terms of lack of movement,” says Altmann. However, it cannot be assumed that the leading index will also be “on the road in a sleeper” this week.
On the underside, this range of 15,600 to 15,700 points has been relevant since the beginning of April. Investors can no longer assume that this brand will last. Because the short sellers, who are betting on falling prices, this mark is no longer enough to liquidate their positions.
Should it go down in the coming trading days, investors should plan for a larger price slide. Perhaps that will herald the first correction of the year, a 10 percent drop.
It is difficult to predict in which direction the Dax will resolve its sideways phase. There is a lot to be said for a price slide, the duration of the rally of more than 30 percent alone, which began at the end of September. So far there has not been a correction, a price drop of at least ten percent from an intermediate high. That would be due.
Another view also signals falling prices. In contrast to almost all other major stock market indices, the Dax is a performance index that includes dividends. Without the dividends, the leading index would be around 300 points lower.
Central banks could ensure a continuation of the rally
Nevertheless, investors should not write off the current stock market rally just yet, but rather wait for a breakout in the respective direction. Despite all the adverse geopolitical and economic circumstances, the Dax is still trading at a very high level and is holding important supports.
The central banks, of all people, could be the trigger for this: Especially if they raise interest rates again slightly by 0.25 percentage points, but also indicate in the wording that the tightening of monetary policy could be completed for the time being. That could lift the leading German index upwards.
A new record high would possibly be a real liberation. Because the current all-time high from mid-May at 16,332 goes well with the “old highs” from 2021 and 2022, which form a triple top at 16,290 and 16,285 points. Even if this is currently a high hurdle that seems almost insurmountable. For Jörg Scherer, a successful breakout has far-reaching consequences.
The Turkish lira continues to fall
New trading day, new lira record low. It’s been like this on the foreign exchange market for a few weeks. The dollar and euro hit their highest levels in history on Monday at 23.73 and 25.42 lira respectively.
According to Commerzbank FX analyst Tatha Ghose, “movement in the dollar/lira ratio as well as anecdotal reports suggest the exchange rate is stable as state banks have started defending the lira again.” So the market is not necessarily convinced that Turkey will now adopt different economic policies.
Investors are of course hoping that with the appointment of Hafize Gaye Erkan as Governor of the Central Bank of Turkey (CBT) and Mehmet Şimşek as Minister of Finance, Turkey will return to “reasonable” economic policies and fight high inflation with higher interest rates.
Because the Turkish President Recep Tayyip Erdogan is a self-proclaimed “interest enemy” and wants to boost the economy with cheap money. However, because the exchange rate of the lira falls as a result, imports become more expensive and inflation heats up.
But this “unconventional” Turkish economic policy emanates directly from the one man at the top and is unlikely to change as long as Erdogan remains President “The foreign exchange market sees through this problem for the most part, so that when the foreign exchange interventions by the CBT and the state banks ease off, a massive price movement in the Dollar-lira exchange rates could follow,” says Ghose.
Look at other individual values
burning day: At the Dax group are presented eFor the first time, US shareholder advisors are fully on the side of an aggressive hedge fund. That should cause tension at the general meeting on Thursday. The share benefits from this dispute and rises by 1.5 percent.
>> Read here: How activist investors want to hijack the Dax group
Rheinmetall: An optimistic outlook encourages investors to buy. The shares of the armaments group and auto supplier rise 1.3 percent. CEO Armin Papperger described a market value of 17 billion euros as realistic thanks to the brilliant business prospects in an interview. The market capitalization is currently a little over ten billion euros.
Adidas: A positive analyst comment heaves the paper up. The shares of the sporting goods manufacturer rose by 3.5 percent to 165.62 euros. The experts at Bank Bernstein have raised the price target to 190 from 155 euros.
CTS Eventim: After critical statements in a TV show, investors withdraw. The ticket marketer’s shares fell by 1.6 percent. In the “ZDF Magazin Royale” show, moderator Jan Böhmermann criticized the company’s market power and fee policy, among other things.
Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.