Dax returns profits

The plus signs at the end of this week coincide with slightly falling bond market yields. This value for a ten-year US government bond is not 3.12 percent as it was on Wednesday, but currently only 3.05 percent.

The yield on a federal bond with the same term has also fallen in the past two days from 1.39 to currently 1.34 percent. But the further development of both the bond and stock markets depends on the speech by Fed Chair Jerome Powell at the central bank conference in Jackson Hole this afternoon, Central European Time.

The risk for the markets is long-term inflation expectations. If Powell overemphasizes the long-term dangers of inflation, prices are likely to slide.

Because market participants are counting on an interest rate increase of 50 to 75 basis points in September and on further interest rate increases with decreasing momentum until spring 2023. From the higher level, interest rate cuts in the second half of 2023 will then be priced in. Powell’s speech has the potential to change those expectations.

In the run-up, numerous hedge funds have positioned themselves in anticipation of a clear signal of tight monetary policy, as the Bloomberg news agency writes. Corresponding price bets would have tripled within a month.

So far, the stock market month of August 2022 has been average. The Dax is down 1.8 percent on the closing price at the end of July and is therefore on average. Statistically speaking, August is the second weakest month within a stock market year. Only September, with an average minus of 1.94 percent, made more losses.

Of course, such an average value says little about the individual stock market years. True to the motto: one foot in boiling water and the other in ice water results in a comfortable temperature on average.

However, what is striking when you look at the statistics: in the past 20 years there have only been two cases of a minus of more than 3.5 percent in August. In August 2011, the Dax slipped almost 13 percent because the United States was threatened with insolvency.

And in 2015, the leading index lost 9.3 percent in that month because China also unsettled the markets. Beijing had traders arrested and forced state banks and other state-owned companies to buy shares even though they were heavily indebted. Otherwise there were only minor losses, but the gains were also not very pronounced. At least that gives hope that the Dax will not crash in the remaining four trading days. Robert Halver from Baader Bank also expects the same. “Despite all the risks, the stock markets are in a stable position,” says the capital market expert

Gas prices are picking up again

European gas prices are soaring. The futures contract for delivery in October on the Dutch energy exchange increased in price by 3.7 percent to EUR 327.13 per megawatt hour and is thus at a record level. The highest price was reached at the beginning of March with 335 euros. The September future increases by 3.7 percent to 322 euros per megawatt hour.

Exporter Gazprom wants to temporarily interrupt operation of the Nord Stream 1 pipeline at the end of the month for maintenance work. At the start of trading, the price was still below 300 euros. For comparison: a year ago it was around 50 euros.

Lira slips towards record low

The Turkish lira is on track to touch its record low from last December. In turn, the dollar has climbed to a new high for the year of 18.20 lira against the Bosphorus currency. The record value from December 2021 is 18.36 lira.

The currency analysts at Commerzbank point to the new problems that Turkish banks are now having in lending. Because of the combination of policies, a bank whose lending rate is more than 1.4 times the base rate must deposit 20 percent of the loan amount with the central bank in the form of government bonds as collateral. At 1.8 times the base rate or even more, the security is 90 percent of the loan amount.

The new key interest rate for corporate loans is officially 15.34 percent. The latest data shows that the weighted average corporate lending rate for the banking sector is around 21 percent.

For FX expert Tatha Ghose, the numbers show that the fine isn’t working overall. “But the crux of the matter: The fine expressly makes risk premiums for riskier loans more difficult,” he explains. And that is not compatible with safe pricing of risky loans.

Regardless of the respective interest rate, this mechanism does not allow for a natural risk assessment by banks: “For the lira exchange rate, this is a slap in the face,” says Ghose.

Look at individual values

Lufthansa: The stock fell 0.4 percent. In the wage dispute with the pilots, the airline can go on strike at any time. Lufthansa has submitted a new offer, which the Vereinigung Cockpit union believes is insufficient despite “a step in the right direction”. Preparations for strike action had begun.

Continental: The shares lose 1.4 percent in value. A skeptical study by Bankhaus Metzler weighed heavily. Analyst Jürgen Pieper argued that the auto supplier’s targets could be at risk because of the risk that demand in the tire business could cool down. The weakening economy could affect the kilometers driven and thus dampen demand. In the longer term, the expert also referred to climate change in Europe as a brake on the highly profitable winter tire business.

Software AG: In the MDax, the share certificates benefited from positive industry news with an increase of 0.3 percent. The Canadian company OpenText wants to take over the British competitor Micro Focus.

Its papers recently skyrocketed by a good 91 percent in London. Another positive factor was that the provider of cloud applications for finance and human resources, Workday, exceeded the market’s low expectations with its business figures. Workday shares rose about 13 percent in US after-hours trading.

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