Dusseldorf The German stock market is surprisingly robust against negative news – especially when it comes to interest rate developments. The Dax closed unchanged at 15,633 points on Thursday.
Trading has been rather quiet compared to recent sessions. The leading index was almost continuously in the red until the afternoon, before friendly US stock markets lifted it up a bit.
The daily low was 15,535 points and thus close to the low point that the Dax reached after the speech by US Federal Reserve Chairman Jerome Powell. With his announcement on Tuesday that he would speed up the rate hikes, Powell caused the Dax to slip around 200 points.
From the proximity of the two lows within three trading days, it can be concluded that short-term buying interest prevails just above 15,500 points.
The Dax is therefore still close to its most recent annual high of 15,706 points and also just under four percent below the record high of 16,290 points – an interesting development.
>> Read here: Powell’s Painful Message for Investors – The specter of recession is hovering
Powell’s words are driving interest rate expectations higher and are having a particular impact on the bond market. Yields on bonds with a two-year term – these bonds are particularly sensitive to changes in monetary policy – have reached multi-year highs.
The yield on two-year US government bonds has risen to 5.08 percent, the highest level in the past 16 years. The yield on two-year Bunds also reached 3.38 percent on Thursday, its highest level since 2008.
Investment professionals remain skeptical
Both investment professionals and private investors used the new high for the year last Tuesday to take profits. This can be deduced from the current sentiment survey conducted by the Frankfurt Stock Exchange among medium-term investors. This also explains why it quickly went down again after the record high.
Five percent of the professionals surveyed have sold and are now waiting before getting back in. 15 percent of private investors sold, half of them went “short”, so expect prices to fall even further.
According to the behavioral economist Joachim Goldberg, who evaluates the survey, both groups of investors are skeptical about price gains in the stock market barometer. This skepticism appears to be generally more pronounced among institutional investors in particular. However, the pessimism is small in absolute terms and should therefore hardly have a market-moving effect.
Goldberg expects greater buying interest from investors again between 15,220 and 15,270 points. “However, this demand would not be sufficient to be able to sustainably counteract any larger and long-term capital outflows, for example from abroad,” says the sentiment expert. However, there are currently no indications of such outflows.
Hellofresh and Varta remain the focus of short sellers
Hellofresh shares fell to their lowest level in almost three years on Thursday at EUR 17.83. Since the high of EUR 97.50 at the end of 2021, the paper has lost more than 80 percent. And if the hedge funds are right, there is still no end in sight to the downward slide.
Because the share remains the favorite value of the short sellers – together with the Varta paper. With no other share certificates is the proportion of short sales as high as with the battery manufacturer and the recipe box mail-order company.
According to the Federal Gazette database, Varta currently has a short sale rate of 8.91 percent of all freely tradable shares. At Hellofresh, this rate is 8.46 percent. In contrast to the Kochboxenversender, the Varta share has risen by almost 50 percent since the end of December.
Short sellers rely on falling prices with so-called short sales. To do this, they borrow shares for a small fee and sell them immediately in the hope that prices will fall and they can buy back the shares at a lower price before the return date. The difference between the sell and buy price is your profit.
The fact that the short sellers are not closing out their positions is more of an indication of further price losses for both stocks. Because there have been plenty of opportunities to realize high profits in recent months.
Two important appointments on Friday
A preliminary decision on the future path on the German stock market could bring tomorrow, Friday. Two important dates are pending: on the one hand, the US labor market report, on the other hand, the big expiration day on the futures markets, also known as the “Witches’ Sabbath”.
The US labor market report, which is published on the first Friday of every month, has become particularly important because, according to US Federal Reserve Chairman Powell, no decision has yet been made on the extent of the interest rate hike in March. Accordingly, the report could answer the question: will interest rates rise by 25 basis points or by 50 basis points on March 22?
In the labor market report, economists expect jobs to increase by 203,000 in February, after 517,000 in January. The level of wage increases is also likely to be an important figure, as it is an indicator of future inflation trends.
According to data from the provider Stock Street, most of the calls due on Friday are between 16,100 and 15,500 points during the Witches’ Sabbath. The buyers of these calls have an interest in the Dax rising as much as possible.
The sellers of these call options, known as “writers” in the jargon, want prices below the settlement price if possible. These sellers are usually banks or institutional investors who hold the underlying asset of the option in their own portfolio. It is quite possible that the Dax settlement rate on Friday afternoon is within this range.
Look at the individual values
Nordex: The weakening economy has affected the earning power of the wind power plant manufacturer more than expected. According to preliminary calculations, the operating profit margin was minus 4.3 percent in 2022. A range of zero to minus four percent was forecast. The Nordex share lost up to one percent, but then turned into profit and gained more than six percent. It was the strongest share in the MDax small-cap index.
Gerresheimer: This was followed by Gerresheimer shares with a plus of five percent. JP Morgan analysts have upgraded the stock to overweight from neutral, according to traders.
>> Read here: The current company figures from today in the news blog
LEG: The fact that the MDax still closed in the red was partly due to the LEG share. It collapsed by more than eleven percent to 60 euros. The real estate group had announced that it would suspend the dividend. Other industry stocks also lost significantly: TAG Immobilien was 4.5 percent lower, Aroundtown 6.3 percent and Vonovia five percent.
German postal service: After a past record year, the company is already preparing for shrinking profits in 2023. The dividend proposal causes disappointment on the stock exchange. Although Deutsche Post increased its consolidated profit to EUR 5.4 billion, exceeding analysts’ expectations, the dividend is said to be only EUR 1.85 per share. 1.89 to 1.91 euros were expected. However, the board of directors announced that it would expand its share buyback program, which had previously totaled two billion euros, by one billion euros. The stock rose 1.5 percent.
Hanover Re: The reinsurer is paying out a total of six euros per share to its shareholders for the past year. The total dividend consists of a base dividend of five euros and a special dividend of one euro. The total exceeds the distribution from the previous year. The share lost 3.4 percent.
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