Frankfurt The German stock market was stable on Friday. The Dax is around 0.2 percent down at 15,450 points. Munich Re, RWE, Fresenius, FMC, Hannover Re and Sartorius were among the winners with price gains of more than one percent.
These also cover the strong loss of around five percent in BASF shares. The chemical company announced early in the morning that it was ending its share buyback program early. In addition, after a significant drop in earnings last year and the high burden of the energy crisis, the company is cutting 2,600 jobs worldwide – a large part of which is in Germany. For the current year, BASF is preparing for a further decline in earnings.
Current domestic data is making a positive contribution to sentiment. Germans are in a buying mood for the fourth month in a row as inflation falls and fears of a recession recede. For February, the GfK market researchers forecast an increase in their consumption barometer by 3.7 to minus 33.9 points – the best value in six months.
At the same time, negative economic data was published. The German economy shrank by 0.4 percent in the fourth quarter of 2022. That’s significantly higher than the flash estimate from late January, which reported a decline of 0.2 percent.
The specifications from Asia had been inconsistent. In China, the major indices lost between 0.6 and 1.0 percent, while in Japan they recorded gains. In the US, markets were firmer on Wednesday. The broad S&P 500 was up 0.5 percent, while the growth stock-focused Nasdaq 100 was up around 0.9 percent.
What comes after the stock rally?
The current discussions about the further Dax trends are taking place against the background of a remarkable rally. The leading index stagnated in February. However, the Dax has gained a remarkable 29 percent compared to the low at the end of September – in just under five months. This was unexpected for most finance professionals.
>> Read also: BASF is cutting 2,600 jobs worldwide – the chemical giant expects significant declines
At the same time, the rapid increase ensures that the Dax is only five percent away from its top: On January 5 of last year, the leading index reached its highest closing level of all time at 16,271 points. Shortly thereafter, the Ukraine war, the sharply rising inflation and the massive change in monetary policy by the central banks caused share and bond prices to plummet.
The well-known fund manager Jens Ehrhardt explains the marked increase, among other things, with the opening of China, after the country had long enforced strict corona rules. In addition, the fall in interest rates on US bonds made for more positive news on the stock markets.
Short sellers play a role for the founder of asset management company DJE Kapital. These investors borrow shares from banks or mutual funds and sell them in the hope of being able to buy them back at a lower price and then return them to the lender. The difference, minus a loan premium, is your profit.
As a reaction to the rising share prices in Europe, professional investors and traders had to cancel their bets and buy more paper. That also had price-increasing effects, says Ehrhardt.
Fund manager Jens Ehrhardt warns
However, Ehrhardt is very cautious about the future. He believes US equities are expensive and expects corporate earnings to be poor. The professional investors reckoned with a high interest rate of 5.25 to 5.50 percent for the interbank rate (Federal Funds) – i.e. the rate at which banks can lend money to each other. With Fed funds rates in excess of five percent, the dot-com bubble burst at the turn of the millennium and the markets slid into the 2007 financial crisis.
When looking at the global lead market Wall Street, Frank Thormann also expects negative surprises in terms of profits. The previous figures from the reporting season, which is almost over, should be treated with caution. Many companies had lowered their profit expectations in advance in order to be able to surprise positively on the day of the report.
>> Read also: Good economic data hardly allow prices to rise – because they have unpleasant side effects
As chief strategist at Bank MM Warburg & Co, Christian Jasperneite also sees risks. The fall in inflation is going very slowly. The US Federal Reserve is therefore well advised to raise key interest rates further and perhaps leave them at the high level longer than many have assumed. So bond yields could still rise further.
However, analysts at Bank Metzler believe there are limits to further rate hikes by the Fed and ECB. They cite a shrinking money supply for the US, the inverted yield curve, where short-term rates are higher than long-term rates, a recessionary real estate market, and fragile financial markets.
Individual values at a glance
High Low: The construction group published good figures for the past financial year and gave a positive outlook. The share gains four percent and is the daily winner in the SDax.
Hensoldt: Shares in the defense electronics maker rose about 2 percent on the anniversary of Russia’s attack on Ukraine, hitting an all-time high. Since the beginning of the war, the SDax share price has increased almost two and a half times.
Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.
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