Dusseldorf The leading German index Dax posted a brilliant bear market rally on Wednesday: the most important German stock market barometer closed in Frankfurt 1016 points or almost eight percent plus at 13,848 points. It was also the high of the day.
A total of 39 out of 40 Dax stocks closed with profits, and nine index members even posted double-digit percentage increases. After publication of the annual figures for 2021, Adidas and Deutsche Post were among the biggest winners. Only the Siemens Energy share, which was in greater demand recently, recorded a slight minus.
The Dax last recorded such a large increase two years ago, in the midst of the recovery after the Corona crash. Should the Dax keep its gains in the long term, the bear market phase that the leading index entered a few trading days ago would also end prematurely.
Despite the significant price gains, it has so far only been a relief rally, a countermovement in a downward trend that is still intact. The stock market barometer still has a long way to go before it ends.
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Only at rates above 15,000 points would there be better prospects overall. The three important average lines that indicate the short-, medium- and long-term trend are also just above this important resistance level.
But there is also reason for investors to be happy. Because with the price gains, the leading German index on Wednesday significantly strengthened its tendency to stabilize. Last Monday’s high of 13,150 points has been surpassed. Such a fact attracts many bargain hunters into the market and some short sellers are now having to close their positions on falling prices.
This technical effect proved to be an important driver in the course of trading, said analyst Konstantin Oldenburger from broker CMC Markets: “Now that the first brave buyers are daring to enter the market, those who have speculated on further falling prices will enter a so-called short Forced to squeeze.” So they are closing their bets, further driving the market.
Despite the upbeat mood, investors shouldn’t lose sight of the underside. This is about the mark of 12,438 points that was reached on Monday. It is the lowest listing in the still young stock market year, which has been a huge disappointment so far.
Investors should reckon with another test of the annual low, i.e. expect prices below 12,500 points again. At least, such a retest of the bottom was common in the major reversals of recent history, the March 2020 coronavirus crash and before the start of the November 2020 vaccine rally.
Carsten Roemheld, capital market strategist at the fund house Fidelity International, currently only sees a countermovement on the stock exchanges. “The final sell-off hasn’t happened yet.” The “Jojo-Börse” with its clear daily fluctuations will probably continue in the coming days.
Oil prices slip five percent
The US import ban on Russian oil and gas initially pushed oil prices further on Wednesday. Both the North Sea variety Brent and the US variety WTI climbed around two percent. But in afternoon trading, prices slipped again. In the evening, Brent is trading at around $120.40, down six percent. The WTI course also fell by more than five percent, a barrel costs 117.44 dollars.
A presumably important influencing factor: The International Energy Agency (IEA) is countering investors’ fears of oil supply bottlenecks due to blocked Russian inflows. The IEA is ready to release additional oil reserves to bring more oil to the markets, agency boss Fatih Birol said at an energy conference in Paris.
Oil prices have risen more than 30 percent since Russia invaded Ukraine and the United States and other countries imposed a raft of sanctions. However, Russian oil and gas exports were already being shunned before the ban as traders braced themselves for future sanctions.
According to analysts, Russia, as the world’s second largest oil exporter, will clearly feel the effects of the measures. Goldman Sachs expects more than half of Russian oil exported from ports to be stranded. JP Morgan estimates that around 70 percent of Russia’s sea oil will struggle to find buyers.
Fears of supply disruptions from Russia are likely to fuel prices further, said Hiroyuki Kikukawa, investment strategist at Nissan Securities. “But Monday’s highs are likely to cap in the near term as speculative buying is expected to slow soon and northern hemisphere countries head into spring when fuel demand falls.” Prices were at their highest levels on Monday jumped since July 2008, when Brent was trading at $139.13.
Exchanges suspend trading in nickel
The prices on the metal exchanges are also calming down after their extreme price increases. The palladium used for autocatalysts, the main exporter of which is Russia, has meanwhile become cheaper by almost seven percent, before things pick up again slightly in the evening. Aluminum, which is needed in aircraft and automobile construction, loses four percent and is quoted at $3,357 per ton. Copper is three percent lower.
Trading in the nickel required for steel production, which had recently more than doubled in price to a record high, remained suspended on the London Metal Exchange. Meanwhile, the Asian futures contracts in Shanghai are not traded for a day.
Speculations about bottlenecks in supplies from Russia, one of the most important exporters of the raw material, pushed the price above the $100,000 a ton mark for the first time on Tuesday in London. In Shanghai on Wednesday, the price jumped 17 percent and hit a trading limit.
Chinese nickel producer Tsingshan Holding Group, amid its bets on falling nickel prices, has had to buy large quantities of the metal to reduce costly margin calls, three people familiar with the matter said. That also fueled the rally.
Gold price slips below $2000 mark
In a market environment that has become friendlier for riskier assets, gold has lost value. The price of a troy ounce of the precious metal was more than two percent lower at the $2,000 mark. As of Tuesday night, the price peaked at $2,070, just $5 below the August 2020 record.
Since the invasion of Russia began, the increase has accelerated. Since the end of 2021, the increase has been almost twelve percent; seven percentage points go back to the increase since the Russian invasion. In euros, gold has been going from one record high to the next for days. The current record is 1902 euros. But on Wednesday the price fell back here too.
In the opinion of Alexander Zumpfe from precious metal dealer Heraeus, “only a little metal comes back into the market”. Despite the high price, retail investors are reluctant to take profits by selling their holdings. Instead, all bar sizes are in demand, but especially small bars up to 100 grams. “There are currently very few reasons that speak against a rising gold price,” says the metals expert.
Meanwhile, the ruble continued to fall. The dollar rose by around seven percent against the Russian currency in the evening to 128.25 rubles. The record high is 150 rubles. Traders describe trading as extremely illiquid. Trading in stocks and derivatives in Moscow has been largely shut down by the central bank since the beginning of Russia’s invasion of Ukraine.
Look at the individual values
German postal service: After a record result last year, the company is significantly increasing the dividend. In addition, the Bonn-based group announced another share buyback. This news sent the stock up 12.5 percent.
For the current year, however, Post boss Frank Appel has been cautious: After a jump in profits, he only expects stagnant operating results for 2022. The forecast does not include the economic consequences of the Russian invasion of Ukraine. In the medium term, the group intends to further increase its profits.
Adidas: The world’s second largest sporting goods group wants to increase its sales and profit by double-digit percentages this year. And this despite the withdrawal from Russia as a result of the Ukraine war. Based on the forecast, the share was the strongest Dax value with an increase of 13.6 percent.
burning day: The chemicals trader defied supply bottlenecks and achieved record results. The shareholders are to participate with a dividend increased by ten cents to EUR 1.45 per share, which gave the share an increase of seven percent.
Kloeckner & Co: The steel trader expects a drop in profits in the current financial year. The price dynamics will probably not be as strong as in the previous year, according to the annual report published on Wednesday. Therefore, the operating result will be significantly lower. In 2021, KlöCo had achieved the best operating result since its IPO in 2006. The stock gained five percent.
German mortgage bank: In the small-caps index SDax, the share was the undisputed leader with a price jump of 119.5 percent. The real estate financier exceeded its profit target in the second Corona year, also thanks to an improved situation with loan defaults.
Siltronic: After the annual figures were presented, the shares went up by more than twelve percent. The wafer maker proposed a 50 percent dividend increase after a profit jump and aims to be more profitable in 2022 despite rising costs.
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