Dusseldorf The German stock market initially went up significantly. In the meantime, the Frankfurt benchmark was even listed at 13,736 points, but after the disappointing US inflation data, the leading index slipped back into the red and was traded at 13,514 points. Around 4 p.m. later, the Dax is up 1.6 percent again at 13,755 points, 220 points above the previous day’s close.
The US CPI, which broadly measures the prices of goods and services, rose 8.3 percent year-on-year, beating analysts’ estimates of just 8.1 percent.
This amplifies inflationary pressures across the economy, weighing on budgets and prompting the US Federal Reserve to raise interest rates aggressively.
The core CPI, which excludes food and energy, rose 0.6 percent from the previous month and 6.2 percent from April 2021, according to Labor Department data released on Wednesday.
Yesterday, Tuesday, the leading index ended trading with a plus of 1.2 percent and a final level of 13,534 points.
Tuesday was a very constructive trading day because the important mark of 13,500 points was not sustained. Although the closing price on Monday this week was 13,380 points, “sustainable” means that the following trading day must also be included.
And on Tuesday, the Dax was above this mark for the entire session. With the daily high of 13,720 points, it even looked like a decent recovery rally.
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.
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. First, the yield on a 10-year US Treasury bond was well below the 3 percent mark, then rose to 3.0344 percent, before slipping back below that mark.
On Tuesday, this figure peaked at 3.2 percent. The ten-year federal bond slipped below the one-percent mark from 1.183 percent the previous day, but is currently back at 1.032 percent.
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.
But technical analysis also sees a silver lining in the current development. 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 stock slipped 8.8 percent. 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. The stock is up four percent.
However, the shares also followed the Europe-wide strength of the sector. Porsche, Mercedes-Benz, Volkswagen and BMW gained between four and 5.4 percent.
Thyssen Krupp: The steel group benefited from the increased steel prices in the second quarter of its 2021/22 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 11.8 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 share rushes down to fifteen percent. At 20.38 euros, they cost less than they have for more than two years. 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.
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