Dusseldorf The turning point came in the early afternoon: Following a successful start to trading on the German stock market on Tuesday, the Dax slipped significantly. The reason for this was the new US inflation data, which caused the leading German index to fall by almost 400 points.
At the end of trading, the Dax was 1.6 percent lower at 13,189 points and thus in the immediate vicinity of the daily low. Shortly before the inflation data, the stock market barometer was still at 13,564 points, which corresponded to an increase of 1.1 percent.
Inflation in the US fell to 8.3 percent in August on the back of a slowdown in gasoline prices, but failed to meet expectations of 8.1 percent. According to Thomas Altmann from the investment house QC Partners, at least the direction is right. “The inflation rate is falling – just more slowly than hoped,” he says.
In a month-on-month comparison, prices rose by 0.1 percent in August. If you annualize the monthly value of 0.1 percent, you come up with an annual rate of a good one percent and thus a number that is well below the target of the US Federal Reserve. “The fact that the inflation rate is still far too high is due to months such as March, in which prices on both sides of the Atlantic literally exploded,” explains the capital market expert.
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According to the new price data, it is definitely certain that the Fed will raise its key interest rate again by 75 basis points in the coming week. The data are “but not as disastrous as the first market reactions assume,” says Altmann. It may just be short-term traders who pressured the market on Tuesday.
On Monday, the Dax had gained more than 300 points. This has raised the question of whether a new bear market rally may be imminent – or even a turnaround in sight.
The preliminary decision should probably only be made in the range of 14,000 points. This is also the area where the 200-day moving average, which long-term investors are watching, is heading, although that move suffered a setback on Tuesday. Since the start of the downward trend at the beginning of the year, the leading index has not been able to break through this line once.
Even if the list of reasons that speak for a bear market rally is extremely long: In the past few trading days there have been the first signals that make a sustainable trend reversal at least seem possible.
Because in the period when the Dax climbed up, there was an extremely large number of negative reports for the stock markets. The European Central Bank (ECB) raised interest rates by 75 basis points and does not rule out further hikes of this magnitude. This scenario applies to the US Federal Reserve anyway. And the economic research institutes are also certain that Germany is slipping into a recession.
But how can prices rise with such negative reports? For the sentiment expert Stephan Heibel, there is much to suggest that all the bad news is known. “It’s difficult to forecast further falling prices based on this mood,” he says after evaluating the Handelsblatt survey Dax sentiment and other indicators. In his opinion, due to this constellation, there is at least the possibility that a bottom is currently being formed.
It’s Witches’ Sabbath again on Friday
There are many indications that a decision on the future direction should be made by the beginning of next week at the latest. Because Friday is another big day of expiry in 2022, the so-called “Witches’ Sabbath”. On the stock exchange, this repeatedly leads to capers with unusually high turnover.
Last year, the Dax trading range on Friday and the following Monday was around 800 points. In December 2022, on the Monday after the big expiry day, after initial price losses, the starting signal for a respectable year-end rally was given.
On Witches’ Sabbath days, futures and options on the Dax and options on individual shares expire at the same time on Eurex, the futures market of the German and Swiss stock exchanges. It is important for investors to know at which price points the largest outstanding volume of the options can be found.
The table from the Stockstreet website shows that the largest call and put positions are found at 13,000 points, with buyers betting that prices will rise or hedging against falling prices. The second largest positions can be found at 14,000 points. Accordingly, there is a high probability that the Dax options and futures will be settled between these two round marks on Friday.
Goldman analysts expect gas prices to fall
The gas price oscillates around the mark of 200 euros per megawatt hour on Tuesday. The futures contract TTF on the energy exchange in Amsterdam for the month of October, which is trend-setting for European gas trading, was just above this round level in the afternoon. Compared to its record high at the end of August, it had lost almost 50 percent in total in the past few weeks
In the opinion of Commerzbank’s commodity analysts, this is likely to be due to inventories that continue to rise. Storage facilities in Europe are now 84 percent full; this corresponds to the usual level at this time of year. On the other hand, at the political level, people are still looking for ways to limit the high energy costs.
After the special summit of EU energy ministers on Friday, EU Commission President von der Leyen wants to present concrete proposals this week. The cap on gas import prices has probably been postponed for the time being, but among other things, mandatory electricity savings targets for peak loads are being considered. But even if gas prices have recently fallen significantly, Commerzbank expert Barbara Lambrecht believes that there is no reason to give the all-clear.
Analysts at major bank Goldman Sachs, on the other hand, expect prices to halve from current levels in the first quarter of next year. They assume that the high storage levels at the beginning of the season will allow above-average withdrawals, so that the reservoirs will still be more than 20 percent full by the end of March.
“Against this backdrop, the sense of urgency to destroy demand will gradually give way to a sense of market relief that we have come through the winter,” write the analysts, who expect prices below EUR 100 per megawatt hour in the first quarter.
Look at individual values
Zalando: The prospect of rising interest rates weighs primarily on high-growth companies. Zalando and Hellofresh were at the bottom of the Dax with losses of 8.3 and 6.8 percent.
Sartorious: The analyst Delphine Le Louet from Societe Generale slightly increased the price target for the pharmaceutical supplier to 577 euros. The expert expects a real growth spurt in the coming year. The share initially rose to EUR 406.50, but ultimately closed 3.8 percent lower at EUR 382.50 in the generally weak market environment
Encavis: In the MDax small-cap index, the shares rose three percent. The rating agency Scope had confirmed that the probability of default of the solar and wind park operator’s bonds was low. In addition, the outlook was raised from “stable” to “positive”. The reasons for this are the significant strengthening of the credit ratios and the gradually improving geographical diversification of the product portfolio.
Fraport: Thanks to flourishing tourism, around 5.2 million passengers flew through Frankfurt Airport in August. That is 54.1 percent more than in the same month last year, but still almost a quarter less than in the pre-Corona year 2019. The airport operator’s share rose by up to 1.5 percent, but later gave up its gains again.
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