Dusseldorf A sell-off mood prevailed on the German stock market on Thursday. The Dax slipped 2.7 percent in the afternoon and is trading at 15,482 points, more than 420 places less than the previous day’s close. With 15,456 digits, the stock exchange barometer also reached a new low for the year. This is a legal sell-off, a clear price slide with a simultaneously high trading volume. This development came as no surprise.
Conversely, the “buy the dips” mode – every price setback is seen as an opportunity to buy – is apparently coming to an end. This pattern characterized almost the entire stock market year 2021, which explains that there were only minor price declines during these twelve months. Now “Sell the Rally” applies more and more. Rising prices are seen as an opportunity to sell, and the market as a whole is trending downwards.
Such behavior was evident in the United States on Thursday. There, after four losing trading days, an initial price recovery ultimately collapsed. The US stock markets are still going down this Friday. This confirms the forecast of the Handelsblatt survey Dax-Sentiment that only a sell-off can end the current weak phase. The numbers next Monday should show whether this slide on Friday is sufficient.
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As on Wednesday this week, the focus of the German stock exchange barometer was the 200-day line, which is currently listed at 15,608 points. Many investors base their decisions on this moving average, which shows the long-term trend.
As recently as last Wednesday, around 30 points above this line, lively interest in buying started again, which then pushed the leading index up by 270 points. But on today’s trading day, the Dax gave up this support.
This Friday, the next range of 15,500/15,450 positions was already reached. According to a survey by the Frankfurt Stock Exchange, many domestic professionals want to sell their newly acquired short products, whose prices rise when prices fall, at a profit. Whether that’s enough will probably only become apparent at the beginning of the coming week.
The mark of 15,000 jobs, which has existed since April last year, is decisive for the medium-term trend. Sustained prices below this mark are likely to result in a longer-lasting sell-off.
Small expiry date without great relevance
Today, Friday, was the small expiry day on which options on indices and individual stocks expire and are settled. It was important for investors to know at which price points the largest outstanding volumes of the options can be found.
But the positioning of the futures market professionals did not have a major impact on the price development. At the Dax, the largest positions expiring today were too far away from the current index level to really move prices. The important put options were at 15,200 and 15,000 points. On the call side there were 16,500 and 16,200 positions.
Bonds are in demand again
In contrast to stocks, bonds are in demand again. The prices of the titles, which are often targeted as a safe haven, are rising, in return the yield has fallen to its lowest level in a week at minus 0.065 percent. Fear of a Russian invasion of Ukraine, but also the prospect of continued loose monetary policy in the euro zone, prompt investors to buy Bunds. US government bonds are also being bought again. This pushes the 10-year Treasury yield down to 1.7758 percent.
Cryptocurrencies are currently also affected by the risk aversion towards risky asset classes such as shares. Bitcoin, which started the new trading year near the $50,000 mark, has fallen by more than eight percent to $38,411 in the last 24 hours of trading, according to data from the Coinmarketcap website. According to data from Coinglass, about $726 million worth of positions have been liquidated in the last 24 hours, about 30 percent of them in Bitcoin.
Netflix stock sell-off
In the coming week, the big tech stocks like Apple and Microsoft will be able to look at their books. Streaming market leader Netflix gives a first indication of how the numbers could turn out: After the corona boom, it only expects weak user growth. The company thus remained well below the forecasts of the analysts. The stock fell about 20 percent in after-hours trading. Netflix’s bleak business outlook also put a lot of pressure on the stocks of other streaming providers like Disney after the Wall Street market closed.
The course of Peloton, a manufacturer of fitness equipment, also showed how nervous the market is at the moment. Reports about an upcoming production stop caused the share to fall by 23 percent, only a denial by the CEO caused an increase of nine percent after the trading session.
Gold price has ended its downtrend
Ongoing tensions between Ukraine and Russia are affecting the precious metals market. Palladium is primarily affected. The course has risen above $2,000 a troy ounce (31.1 grams) again and is currently at $2,050. According to Commerzbank analyst Daniel Brieseman, Russia is an important palladium supplier. “An export stop of the raw material that is so important for the automotive industry could probably not be compensated.”
Gold is also enjoying renewed popularity. The price of the precious metal was trading at around $1,839 per troy ounce (around 31.1 grams) on Thursday, close to a two-month high. According to Briesemann, the most recent price impulse was due to US investors, who are again directing money into physically backed gold index funds.
The technical analysis signals further rising prices. Because the downward trend since the summer of 2020 has dissolved. According to Jörg Scherer, technical analyst at HSBC Germany, the foundation has been laid for a run at the previous record high of 2072 dollars.
On the way there, the former record high of 2011 at 1920 dollars marks an important milestone. This level aligns well with last year’s June high of $1916. The situation is likely to change if gold prices fall below December’s low of $1753.
Look at other individual values
German Stock Exchange: Winners in the Dax 40 are rare. Only the shares of Deutsche Börse are up more than one percent and at 163.35 euros have reached their highest level since summer 2020. Investors apparently assume that the current fluctuations on the financial markets are beneficial for the stock exchange operator’s day-to-day business.
Nordex, Siemens Energy: Disappointing quarterly results from Siemens Gamesa are affecting both papers. The shares of the wind turbine manufacturer and competitor Nordex fall by 6.6 percent. The paper of the parent company Siemens Energy fell more than 13 percent, a high minus for a title from the Dax 40. Siemens Gamesa scaled back its full-year targets after quarterly sales below market expectations.
In recent months, the Nordex share has become the focus of short sellers, who are betting on falling prices. The short quota for the wind turbine manufacturer has doubled since the summer of last year and is currently around seven percent. The consequences of the global supply chain problems are currently burdening the SDax company, the management has already cut the annual forecast.
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