Dusseldorf On the day of the Fed’s interest rate decision, investors acted cautiously on the German stock market. In a long period of lack of momentum, however, the Dax once again fell below the psychologically important mark of 14,000 points. The leading index closed 0.5 percent weaker at 13,971 points.
For a long time, the stock exchange barometer fluctuated around the previous day’s level with low sales. Only in the afternoon did the Dax continuously increase its losses. The closing level is also the lowest level in trading.
Overall, the course of the past trading days allows the conclusion that the Dax is about to experience a new momentum. On the one hand, the trading range in Tuesday and Wednesday trading was very small at 160 and almost 100 points.
On the other hand, seven of the past eight trading days showed how nervous investors are at the moment. In this phase it happened that the Dax fluctuated significantly. However, the opening and closing prices of each session were close together. So investors grabbed the weaker prices and sold into the rising market.
Top jobs of the day
Find the best jobs now and
be notified by email.
Such multi-day stalemates are in many cases resolved with dynamic price action. So it could be that the leading index is facing a strong movement impulse.
The US Federal Reserve could be the reason for significant losses or gains in the market. The Fed is likely to raise interest rates more sharply on Wednesday evening after the market close than it has in more than 20 years. According to corresponding signals from Fed boss Jerome Powell, investors on the financial markets expect an increase of half a percentage point. This would increase interest rates to the new range of 0.75 to 1 percent.
After the central bank governor’s press conference, the expectations of further interest rate hikes, which have changed significantly in recent weeks, are decisive for the further development of the stock markets. Almost all professionals currently believe in an increase in the following month of June to 1.5 to 1.75 percent. Four weeks ago, only 18 percent considered this scenario likely.
US interest rate between 3.00 and 3.25 percent at the end of 2022?
More than 50 percent of futures market professionals believe the US interest rate will be between 3.00 and 3.25 percent by the end of the year. At the beginning of April, only 6.5 percent held this view. Therefore, any positive change in these expectations should at least boost stock prices on the other side of the Atlantic.
Even before the rate hike, Jim Cramer advised selective buying. The former hedge fund manager and host of CNBC’s Mad Money said: “This is my eighth tightening cycle and I know from experience that if you wait for the Federal Reserve to go ahead, it’s too late to buy is done and inflation has ended.”
According to Cramer, there are some industries “that need to recover if we are ever to find a sustainable recovery and a way out of this miserable period.” He cited real estate, finance, e-commerce and semiconductor chip companies as examples of stocks that have been hit hard despite their “fabulous” fundamentals. Those who cannot bear this turbulence should buy US government bonds, which yield around three percent.
According to an analysis by Bank of America, its investors invested $5.5 billion in the US stock markets last week, the largest inflow since December 2020. BofA customers were particularly active in individual stocks. Equity ETFs, on the other hand, saw only modest inflows.
According to the strategists, it was mainly institutional customers who bought, but hedge funds and private customers also took advantage of the moment. Investors bought shares in the technology and healthcare sectors in particular.
Pessimistic private investors
The extremely negative investor sentiment also signals that the potential for surprises at the US Federal Reserve meeting is on the upside. If the interest rate decision has an effect, then prices are more likely to rise than fall. With such a negative mood, the majority of investors are not invested. Another sell-off seems unlikely because only a few can still sell.
Stephan Heibel, owner of the analysis company Animusx, took a closer look at the expectations of private investors for the future development of the Dax. With a value of minus 24, this is more pessimistic than ever before. In the past 16 years that Animusx has surveyed investors, there have only been two times when the expectation has been more pessimistic: once in May 2020 and then again in June 2020, both times in the midst of the corona pandemic.
At that time, the Dax rose by around 14 percent in the following six months. Converted to today’s price level, the prices would be just under the 16,000 point mark.
In order to think about such prices, which currently appear unrealistic, the leading German index must first sustainably overcome the downward trend since the beginning of January. The stock market barometer failed twice in this endeavor. The falling line begins with the high for the year on January 5th at 16,285 points and is currently at 14,239 points.
Crossing this line is likely to continue to be a difficult undertaking. A first indication would be prices above the 50-day line, which is currently at 14,132 points and shows the medium-term trend.
According to technical analysis, the area from 13,800 to 13,500 points is considered important support on the underside. There is also the low of the past stock exchange month with 13,566 points. Sustainable courses below 13,500 points are predestined for a new wave of sell-offs.
Planned oil embargo drives up prices
The European Union proposes a “total import ban on all Russian oil”. This news pushes oil prices higher. Brent crude oil prices rose by up to 3.5 percent to $108.40 a barrel. The price of US oil WTI rose by up to 3.7 percent to $106.28 a barrel. The EU Commission wants to stop all imports of Russian crude oil with a transitional period of six months.
Food suppliers and transport service providers on a downward slide
A series of bad news resulted in heavy losses for food suppliers and transport service providers. Lyft warned of rising costs to lure drivers back to the company. The share then broke at times by 35 percent, stronger than ever. It will be interesting to see if rival Uber will also need to offer drivers greater incentives, wrote analyst Tom White of research house DA Davidson.
According to Uber, there is no reason to do so. The company, which, like Lyft, also delivers restaurant meals and groceries, also announced earnings ahead of market expectations for the current quarter. However, the titles fell by almost ten percent. The pure US food suppliers DoorDash and Grab were also unable to escape the pull and slipped by up to ten percent.
In Europe, competitors Delivery Hero, Hellofresh, Deliveroo and Lieferando parent Just Eat Takeaway came under selling pressure. Their papers also became cheaper by up to ten percent. At Just Eat Takeaway, a management crisis immediately before the general meeting also hit the mood.
Look at individual values
Fresenius: The medical and hospital group Fresenius continues to struggle with the difficulties of its subsidiary Fresenius Medical Care (FMC). In the first quarter, the dialysis provider’s profits collapsed by almost 40 percent, again due to high costs and the excess mortality of its patients. This also overshadowed the start of the year for the mother. The Fresenius share rose by 3.1 percent, the FMC paper lost four percent.
Volkswagen: The group is confident that it will be able to cushion the most serious consequences of the Ukraine war and the ongoing lack of chips this year. The Wolfsburg car manufacturer therefore confirms its current annual forecast for sales and operating returns, which brought the share a minus of 1.1 percent.
Team viewer: The software house is reaping the fruits of the austerity measures introduced last year. The stock gained eight percent. “We took strong action in all cost areas,” said the outgoing CFO Stefan Gaiser. Expensive sponsorship contracts in football and Formula 1 have burdened the margin of the Göppingen software house at the beginning of the year. The Russian business, which has since been discontinued, plays a subordinate role at Teamviewer.
Here you can go to the page with the Dax course, here you can find the current tops & flops in the Dax.