Dusseldorf The German stock market continues to fall at the beginning of September. On Thursday, the Dax was one percent lower at 12,704 points in the afternoon. The low of the day is 12,611 points.
Since the end of the recovery rally, which lasted several weeks, the Frankfurt stock exchange barometer has fallen by around 1300 points. This movement had also driven the Dax very dynamically by almost 1500 points by mid-August. The highest level in this phase was on August 17 at 13,948 points.
As things went down very quickly as a result, interim countermovements are likely. But the overall picture remains very clouded. Jochen Stanzl from CMC Markets says: “The mood on the stock market has once again reached a low point in this generally gloomy stock market year.”
And the latest inflation data have further increased interest rate fears across the board. In Germany, prices rose by 7.9 percent in August. The price pressure is likely to increase further with the expiry of fiscal measures such as the nine-euro ticket and fuel discount.
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In the euro area, the inflation rate has even reached a record high. For the first time in the history of monetary union, it exceeded the nine percent mark (9.1 percent). Core inflation, which excludes volatile prices, again exceeded expectations.
This makes a strong reaction from the European Central Bank (ECB) increasingly likely. In the past few days, discussions about raising the most important interest rates by 0.75 percentage points have picked up speed. Until next Thursday’s regular meeting of the ECB Council, this debate is likely to gain further interest, especially from the “hawks”, who advocate a strict monetary policy.
Expectations on the money market have shifted accordingly. More and more players are expecting a rate hike of 75 basis points. Taking into account the subsequent ECB Council meeting in October, investors are currently assuming that a 75-point step will be followed by a 50-point step.
The big Wall Street banks are also constantly adjusting their forecasts upwards. The economists at Goldman Sachs, JP Morgan and Bank of America initially expect an increase of 75 basis points, as do the experts at Deutsche Bank.
>> Read here: Inflation at record levels – Bundesbank boss calls for “major interest rate hike”
Rising interest rates push down stock market prices. Added to this is the fear of many market participants and economists that too strong a reaction from monetary authorities will further weaken the already fragile economy and trigger a recession.
The situation in the USA reveals a similar picture. After Jerome Powell’s speech last Friday – the US Federal Reserve Chairman had promised aggressive action against price pressure at the most important central bank meeting in Jackson Hole – share prices have already fallen sharply.
On the other hand, interest rate expectations are strengthening the US dollar. The dollar index, which measures the value of the world’s leading currency compared to other currencies, rose to 109.3 points on Thursday, within reach of a 20-year high. The euro, on the other hand, falls below par with the dollar again in the afternoon.
Professionals and private investors remain cautious
Caution is currently the top priority in the camp of institutional investors. The current losses are not enough for them – they are betting that the Dax will continue to fall. The same applies to the group of private investors. This is suggested by the latest sentiment survey by the Frankfurt Stock Exchange.
It is striking that “the bottom line is that the bears are still reluctant to take profits,” says Joachim Goldberg, who evaluates the survey. “And that’s despite the fact that most of the commitments underlying their mood should have been profitable by now.”
Both groups of investors had recently hedged more or bet on falling prices. But instead of increasingly dissolving these positions, they remain on hold. It is likely “that the majority of pessimists expect even more trouble for the financial markets,” says behavioral economist Goldberg.
Chart technique: looking down
The Dax initially failed in its attempt to regain the 13,000 point mark. The fact that the stock market month of September is historically the weakest of the year exacerbates concerns.
In view of the latest development, you should look at the underside for the time being anyway. First of all, the low from August at 12,758 points, which the Dax undercut immediately at the start of trading, is relevant.
The key support is the lows from July at 12,434 and 12,391 points. The latter is also the lowest level of the year. From a technical point of view, it is important that the Dax does not fall below this level.
Sentiment expert Joachim Goldberg expects investors to keep an eye on exactly these brands. If they then partially dissolve the hedges and bets mentioned, that would support the Dax a little. But Goldberg does not see a turning point.
Look at the individual values:
Lufthansa: The airline is facing the next work stoppage. The 24-hour strike on Friday has disrupted the travel plans of thousands of passengers. 800 flights have already been cancelled. The share lost 2.6 percent.
Gea: After a downgrade, the shares are among the weakest values in the MDax with a minus of six percent. Analysts at JP Morgan have downgraded the equipment manufacturer’s stock to underweight from neutral.
Zalando: Speculations about the entry of Alibaba’s online shopping platform Lazada into the European market are causing problems for Zalando. The shares of Europe’s largest online fashion retailer fell by 2.8 percent to a two-month low of 22.02 euros. According to Bloomberg news agency, Lazada boss James Dong said the company was preparing to launch in Europe.
Pernod Ricard: The French spirits group has been able to push through price increases with its customers and thus significantly increased its profits. With an increase in sales of 17 percent to 10.7 billion euros, profits rose by 19 percent to around three billion euros, as the group with the brands Mumm-Sekt, Absolut-Wodka and Martell-Cognac announced on Thursday. The stock is up after initial losses on the Paris Stock Exchange.
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