Dusseldorf After a series of losses lasting several days, the German stock market is undergoing a strong countermovement: on Friday afternoon, the Dax is up three percent and thus again just above the 13,000 point mark.
The leading index had already recorded significant gains in the morning. The plus increased with the release of the US employment market data and the opening of the US stock exchanges. The increase in new non-farm payrolls was slightly higher than expected at 315,000 jobs. At the same time, the unemployment rate rose by 0.2 percentage points to 3.7 percent.
As a result, the US labor market remains in robust shape. The positive economic data seems to convince investors, even if a strong job market tends to encourage the Fed’s restrictive rate hike cycle. Concerns that the central banks would act too aggressively had recently pushed share prices down sharply.
On Thursday, the Dax fell 1.6 percent and ended trading at 12,630 points. That was the lowest close since July 14. But the positive trend from the USA is also affecting the German market.
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The US dollar, which has been buoyed for weeks on the prospect of sharply rising interest rates, weakened after the data. The dollar index lost 0.2 percent to 109.4660 points.
The course of the European common currency recovered slightly on Friday. In the afternoon, the euro is above par with the dollar, below which it fell on Thursday.
“The decisive reason why the euro is currently unable to recover more strongly against the US dollar is likely to be the sustained demand by investors for the US dollar as a supposedly safe currency haven,” comments Ulrich Stephan, chief investment strategist at Deutsche Bank.
Concerns about the development of the global economy are generating strong interest in investments denominated in dollars. At the moment, market players are investing two trillion US dollars overnight with the US Federal Reserve. Last year it was only one trillion at the same time.
“Since the euro was able to appreciate against currencies such as the yen, the Swiss franc or the pound sterling over the course of the week, it is currently more a question of dollar strength than euro weakness,” says Stephan. “In the short term, further exchange rate losses of the euro against the dollar appear relatively likely and a sustainable recovery is only possible in the medium term.”
>> Read here: Inflation in the euro area rises to a record level – Bundesbank boss calls for “major interest rate hike”
Since the monetary policy of the European Central Bank (ECB) is also an important topic for investors, they direct their attention to European producer prices. In July, these rose by 37.9 percent compared to the same month last year – this is another record. Analysts had only expected an increase of 35.8 percent.
In the statistics, the prices are listed from the factory gate – i.e. before the products are further processed or sold. You can thus give an early indication of the development of consumer prices. On the stock market it is considered certain that the ECB will raise the key interest rate by 0.75 percentage points in the coming week. Investors expect a similar XXL rate hike from the US Federal Reserve at the end of September.
Gold is above the critical mark again
Dollar strength is also weighing on gold prices. On Friday, the price of a troy ounce fell as low as $1688, on Friday it is moving up again and is above the important $1700 level. The correction stopped here in mid-July, followed by a recovery to over $1800.
The trigger for the renewed gold weakness on the previous day is the expectation of rising interest rates in the USA. This makes investing in interest-bearing assets more attractive than gold, which pays neither interest nor dividends.
The inflow into the dollar currency area is also relevant here. Since gold is traded in dollars, investments are more expensive for investors from other currency areas.
“Gold is turning into a sandbag as rising government bond yields have reignited trading in the king dollar,” Edward Moya, a senior market analyst at Oanda Corp, told Bloomberg. “There is no recovery in sight for gold until the rise in global bond yields is over.”
Oil price rises again
Oil prices rose again on Friday after several days at a discount. A barrel (159 liters) of North Sea Brent cost $93.87. That was 1.7 percent more than the day before. The price for a barrel of the US West Texas Intermediate (WTI) variety rose by 1.5 percent to around $88.
In the past few days, oil prices have come under significant pressure. Several factors were decisive, including worries about the global economic development and the ongoing fight by many central banks against high inflation. In addition, similar to gold, there was the strong dollar.
The supply policy of the oil network Opec plus is increasingly moving into focus. The approximately 20 states want to discuss their funding policy on Monday. Saudi Arabia, one of the leading members, recently raised the possibility of reduced funding. The reason for this is the recently falling trend in oil prices, although the price level remains high due to the war in Ukraine.
Look at individual values:
Handle: Bucking the market trend, Henkel are in the red. The shares lose 0.4 percent. According to a stockbroker, the US investment bank Goldman Sachs has downgraded Henkel to “sell” from “neutral”.
Nordex: The shares are recommended for purchase by Citigroup. They’re up 2.6 percent.
SLM Solutions: Nikon’s takeover bid brings the biggest jump in the company’s history. The shares of the provider of 3D printers rose by 73 percent to 19.82 euros. The Japanese camera manufacturer offers the owners of the Lübeck company 20 euros per share. The offer is said to be supported by major shareholders, including company founder Hans-Joachim Ihde and US hedge fund Elliott.
With material from dpa and Reuters.
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