The Dax downward trend has not yet been broken.
(Photo: Marc-Steffen Unger for Handelsblatt)
Frankfurt The past week was impressive for the Dax. The bottom line was that it gained almost six percent and finished with a score of 14,413 points. It was the biggest weekly gain in Germany’s leading index since November 2020 – a time when the development of vaccines against Covid 19 gave investors hope.
Since then the world has changed completely again. Corona has faded into the background on the stock exchanges despite new highs in the number of infections in Germany. Russia’s war against Ukraine, which has been going on for four weeks, dominates everything.
The Dax has lost only 1.5 percent since then. But the fluctuations were extreme. Since then, they have been between minus four and plus eight percent on a daily basis.
In addition, the Dax has not only been on a downward trend since the Russian invasion of Ukraine. Investors were already worried about the massive rise in inflation rates and fears that the central banks would turn around interest rates.
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Since its all-time high of 16,290 points last November, the Dax has lost almost twelve percent, and at times it was even more than 20 percent down. It entered a bear market according to the common definition. Strategists therefore do not attach much importance to the recovery in the past week.
No Dax uptrend yet
“The recent surge is a bear market rally,” said Neil Wilson, chief analyst at online brokerage Markets.com. Bear market rally means an intermediate high in a longer-term downtrend. Uwe Streich, equity strategist at Landesbank Baden-Württemberg, also agrees: “Setbacks on the way to a ceasefire must be taken into account at any time.”
Andreas Hürkamp, equity strategist at Commerzbank, expects a “very volatile swing” on the stock market. He can see a Dax uptrend in the environment
falling growth expectations, higher inflation forecasts, rising key interest rates and declining corporate profits.
According to Hürkamp, profit expectations for companies will still fall significantly. Most companies have already presented their year-to-date guidance along with their 2021 results, but adjustments are likely.
Against this background, the focus of investors should be on Daimler Trucks in the new week. The commercial vehicle manufacturer will present its final figures for 2021 on Thursday and should also give an outlook for 2022.
Daimler Truck and Hannover Re are new to the Dax
Daimler Truck is also in the spotlight because the commercial vehicle division, which was only split off from Mercedes Benz in December, will be included in the Dax of the 40 largest companies on Monday. Hannover Re is also a Dax group from Monday. Deutsche Börse announced this at the beginning of the month during its quarterly index review. The cosmetics manufacturer Beiersdorf and Siemens Energy will no longer be in the Dax. Both will be listed in the MDax of the 50 medium-sized German companies.
>> Read here: Checking the risers and fallers in the indices
Climbers in the MDax are the car rental company Sixt, the media group RTL Group and the chip supplier Siltronic. The automotive supplier Hella, the medical software provider Compugroup Medical and the online used car manufacturer Auto1 Group have to make room for this. They are included in the small-cap index SDax, which comprises 70 companies.
A newcomer to the SDax is the IT service provider Adesso, which was previously not listed in any index. The online fashion retailer Global Fashion Group has to make way for this. In the TecDax of the 30 largest technology companies, the biofuel manufacturer Verbio replaces the solar technology manufacturer SMA Solar.
Leading indicators are likely to have fallen
From the economic point of view, the main focus in the new week will be on the leading indicators for March, and they will not support the stock exchanges. Data on consumer confidence in the euro area are due on Wednesday, surveys on the purchasing manager indices in the euro area on Thursday and the German Ifo business climate index on Thursday. Robert Greil, chief strategist at Merck Finck, expects “significant declines” for both consumers and companies.
Christoph Weil, economist at Commerzbank, is also skeptical about the mood indicators for the economy. He explains this by saying that companies are suffering from skyrocketing energy prices and material and supply bottlenecks, which are exacerbated by the war.
Dekabank is anticipating one of the “biggest slumps” in history for both the purchasing managers’ indices and the Ifo index. The Ukraine war is ultimately a turning point in trade with Russia, but also with a view to the energy supply in Germany.
More: Fund manager survey: Investors fear a bear market in equities.