Dusseldorf After two trading days with a sell-off mood, the situation on the German stock market calmed down somewhat on Tuesday. The Dax closed unchanged at 12,831 points in a more friendly market environment.
In the meantime, the leading index went back above the 13,100 point mark. However, the Dax was unable to maintain its gains as oil prices rose again significantly. At least the losses were limited this time. The rising commodity prices had temporarily caused the price to fall by more than 1000 points in the past two days.
The maximum and minimum were also far apart in Tuesday trading: at around 430 points, after more than 700 points on Monday. The latest development gives rise to hope that the Dax is now forming an initial bottom. The course of trading gives the first indications that the number of sellers who simply throw their shares on the market without regard to losses or valuations is gradually decreasing.
For example, the low for the year of 12,438 reached the day before was no longer undercut. This level is relevant on the downside: any break below would be a sign of weakness and could trigger another sell-off.
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On the upside is Monday’s daily high of 13,150 points. As a result, the Dax did not quite make it back to this level, but at least close. Even a short-term rise above this mark would be surprising and would make some short sellers who have bet on falling Dax prices ponder.
Looking back at major bottom formations in the past, such a process takes a few trading days. During the corona crash in mid-March 2020, the absolute low point was 8255 points on March 16th. This level was tested for five more trading days with high fluctuations, but without falling below it. The trend reversal did not follow until March 24, 2020, with prices above 9000 points being sustainable again. At that time, the leading index ended the trading day at 9,700 points.
The last major correction before the Ukraine war, which took place at the end of October/beginning of November 2020, ended similarly. Shortly before the US presidential election and the announcement of the first corona vaccine, the leading index slipped to 11,457 points. This brand was the measure of all things for three trading days. On the third day, the index even fell further, with suddenly 11,450 points, further price losses were even likely. But it was the start of an unabated rally until the end of 2021.
Both bottom formations and the current situation in the Ukraine war have one important thing in common: a sell-off mood among investors. The indicators of the Handelsblatt survey Dax-Sentiment are currently at an extremely negative level, which as counter-indicators signal an impending bottoming out. The five-week sentiment has already fallen below the value at the end of October 2020, but is still above the values during the corona crash.
For the technical analysts at HSBC Germany, too, the current market phase is not just dominated by psychology. “The Dax may now be in an exaggeration phase,” judge the experts. However, they do not expect any short-term countermovement. “Rather, it is initially about finding a new market balance,” says Jörg Scherer from HSBC Germany.
Oil prices rise significantly
The US ban on Russian oil imports is accelerating the rise in the price of Brent and WTI grades. A barrel (159 liters) of North Sea Brent costs around 132 dollars on Tuesday evening, an increase of 7.4 percent. The US variety WTI also rose by more than seven percent to more than 128 dollars. However, both varieties no longer reach their multi-year highs from the previous day.
On Monday, Brent oil was more than $139, its highest in 13 years. This was followed by an ascent and descent. WTI has since risen to $130.50.
Most experts expect prices to continue rising in the near term. “If the war doesn’t stop, Brent prices could go up to $156-$185 a barrel,” says Kedia Commodities analyst Ajay Kedia.
London Metal Exchange suspends trading in nickel
The price of nickel escaped any control on Tuesday. The metal needed to make steel posted a record price jump of 111 percent and was more expensive than ever at $101,365 a ton. Commerzbank analyst Daniel Briesemann made a so-called short squeeze responsible for this in addition to speculation about delivery bottlenecks. Some investors who had bet on falling prices were apparently caught on the wrong foot by the Ukraine war. The metal exchange LME suspended trading in nickel for the time being.
Because of Russia’s war against Ukraine, more and more investors are seeking refuge in the “safe haven” of gold. The precious metal gained more than three percent and rose to $ 2064. That was the highest rate in a year and a half.
Are hedge funds buying back global fashion stocks?
The insurance and banking stocks, which were weak at the beginning of the week, were at the forefront of the market recovery: With a plus of more than five percent, Munich Re was the second strongest Dax stock after Siemens Energy. Allianz and Deutsche Bank gained more than 2.5 percent. In the MDax, Commerzbank and Hannover Re each gained four percent. Other European financial institutions were also in demand.
As on the previous day, stocks from the renewable energies sector were far ahead in the small-cap index SDax: SMA Solar, Encavis, Nordex and the Verbio share, which was still weak on Monday, gained between 7.3 and 15 percent.
SDax leader was the online fashion retailer Global Fashion Group, which posted a brilliant recovery rally with a price increase of more than 22 percent to almost two euros and at least more than ironed out the previous day’s loss. Since the record high in early 2021, the losses still add up to almost 90 percent. Despite an increase in sales, the company slipped deeper into the red last year and does not have any concrete prospects for 2022 due to the war in Ukraine.
This rally may also have been a signal for hedge funds to take profits. Because recently three hedge funds speculated on falling prices at the online fashion retailer. Your so-called short sale rate was recently around two percent of freely tradable shares.
These hedge funds, also known as short sellers, bet on falling prices with “short sales”. To do this, they borrow shares for a fee and sell them in the hope of being able to buy them back at a lower price before the return date. The difference is the profit. If the stock rises unexpectedly, the hedge funds make a loss.
Look at the individual values
Schaeffler: The automotive and industrial supplier is not making a forecast because of the war in Ukraine. The company announced on Tuesday that it was currently not possible to make a well-founded forecast for the 2022 financial year. Schaeffler will closely monitor further developments and the direct and indirect effects and provide an outlook as soon as possible. However, the share rose by 7.6 percent.
Unipers: In view of the Russian invasion of Ukraine, the Düsseldorf-based energy group Uniper is making a U-turn in its Russian business. Uniper will not make any new investments in Russia. No funds would be transferred to the Russian power plant subsidiary Unipro for the time being. The process to sell Unipro, which was initiated at the end of last year, will be stopped for the time being and will be resumed as soon as possible. In addition, Uniper will write down its loans to Nord Stream 2 AG in the amount of EUR 987 million. The stock temporarily rose by almost seven percent and gave up its gains again during the day.
BASF: The share rose by two percent. Deutsche Bank has downgraded the BASF paper from “buy” to “hold” and lowered the price target from 90 to 64 euros. Even if the shares of the chemical company are very valuable, the headwind is increasing and at the same time there are no price drivers for the next twelve months.
Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.