Dusseldorf The German stock market confirmed its strong form at the end of the week. On Friday afternoon, the Dax was 0.2 percent higher at 16,055 points. The daily high is 16,084 points, just above the record that the leading index had set on Thursday.
The Friday trade is used to process the new records. The trading margin is low, as is sales volume. New job data from the USA confirmed the positive picture in the afternoon. On Wall Street, the most important indices rose again to new record highs.
Despite the relatively calm movement in the market as a whole, the Dax board showed significant fluctuations in the individual values on Friday. In particular, cyclical values are in demand: The MTU share rises above 200 euros and is at the top of the Dax with a plus of six percent. The car manufacturers VW and BMW as well as Airbus, Puma and Adidas are among the favorites. Lufthansa is the best MDax value with plus 5.5 percent.
Elsewhere, investors make good money. Sartorius papers rose above 600 euros for the first time – and then slipped below 548 euros. The laboratory equipment supplier is at the end of the Dax with minus seven percent in the afternoon. The same thing happened with the Merck shares, which rose to a record value of over EUR 219 and then slid sharply downwards. With both papers, the trade has increased enormously after the record highs achieved.
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Weak figures on the state of the industry came from Germany in the morning. Total production fell again compared to the previous month, this time by 1.1 percent. Production is currently still 9.5 percent lower than in February 2020. However, this has hardly any effect on the overall market.
Based on the development on Thursday, there are various scenarios – but it does not look as if the current market situation should cause investors to be uneasy.
Scenario 1: The Dax continues to rise for the time being
It seems as if it took a bigger trigger to take the last hurdle to a new record. The US Federal Reserve then delivered this tailwind with its announcement that it would limit bond purchases from this month onwards. At first glance, that may sound like a contradiction in terms. Nevertheless, this step had long been expected – and all market participants have clarity on how to proceed.
The ongoing rally on Wall Street is therefore also giving wings to the German stock markets. In addition to the monetary policy stimulus, the positive reporting season is also contributing to the good mood. In the past few days, the corporate world has again presented strong figures – experience has shown that exceptions confirm the rule. This factor must not be overlooked in the debate about course records in times of high inflation.
Another important signal: on Thursday, the Dax also held its daily closing price above the 16,000 point mark for the first time – a procyclical buy signal. The chart technicians at HSBC Germany speak of an advance into “uncharted territory”.
From a technical point of view, two upward gaps are also interesting. Since the beginning of the week there has been a gap between 15,760 and 15,690 points. On Thursday, the Dax tore open another small upward gap between 15,998 and 15,973 points.
These arise when the lowest point of the trading day is above the highest point of the previous day. As a result, there has been no trading in this area. From a technical point of view, such a development is considered a sign of strength.
The comparison of highs and lows over several weeks also reveals a positive picture: the Dax has been in an upward trend for several weeks. On a weekly basis, both the highest prices and the lowest prices have been getting higher and higher since the second week of October. In the current week, this has even been achieved on a daily basis. In order for this trend to continue, the Dax should not fall below 15,760 points in the next week.
Scenario 2: The Dax gives way for the time being
The price increase in recent weeks, which lifted the leading index to its new record on Thursday, has been very dynamic – the index has risen very sharply in a short period of time. At the beginning of October, the Dax was still struggling with the 15,000 mark. This makes the stock market barometer susceptible to a corrective movement.
At the current level, there is a high level of willingness among private and professional investors to liquidate positions and make profits. This is evident from various sentiment indicators.
Investors may have sold on Thursday. If this is the case, investors on the sideline have taken the opportunity to get involved in return. This is also indicated by the high trading volume with around 76 million shares traded on Thursday.
This has been observed several times in the past few months: New buyers are entering the market, so that possible setbacks are hardly noticeable. “The decisive factor here will be how the relationship between buyers and sellers develops,” says Thomas Altmann from asset manager QC Partners. In any case, the volume of trade has increased significantly in the past few days – apart from the limited trade on All Saints’ Day.
A look at the Euwax sentiment of the Stuttgart Stock Exchange shows that investors are acting more cautiously. The indicator is trading in negative territory – investors have increasingly turned to put products that lose value when prices fall.
Securing investors can only do the markets good: if the Dax should fall, the put overhang will counteract this. Should it go the other way, investors could be forced to unhedge – which will further boost the market.
New job data from the USA
The situation on the US labor market improved again in October. 531,000 new jobs were created outside of agriculture, as the government announced in Washington on Friday. The separately determined unemployment rate fell in October to 4.6 from 4.8 percent previously and thus more than expected. The new data turned out to be even better than expected.
The dollar index, which reflects the exchange rate against major currencies, rose to its highest level in 13 months. This in turn pushed the euro down to its lowest level in 15 months at $ 1.1515.
US job data has been following investors very closely over the past few months. They were hoping for clues as to how the Fed will proceed, which has always made a robust recovery in the labor market a condition in order to adjust monetary policy. The Fed has now initiated the turnaround in monetary policy.
Nevertheless, the labor market data could provide new perspectives as to when the central bank will take possible interest rate hikes. “Interest rate hike expectations could pick up speed again, regardless of the Fed’s assurances that the time for interest rate hikes is not yet ripe,” commented Ralf Umlauf from Helaba. Bastian Hepperle from Bankhaus Lampe stated that despite the strong numbers, the level of employment before the pandemic was still a long way off.
Varta shares lose a fifth of their value
Investors flee the Varta share on Friday. The battery manufacturer’s papers collapse by up to 20 percent on Friday and are heading for the largest daily loss to date. For the first time in over a year, the paper even fell below the 100 euro mark in early trading. On Thursday it had closed at 128 euros.
Some customers are affected by delays in the delivery of raw materials or semiconductors, said Varta. Some would also have interrupted their production due to lockdowns in Asia. In addition, the delayed start of new customer projects had a negative impact.
The board of directors has reduced the expected sales for the year 2021 by 40 million to 900 million euros. The forecast for the operating result (Ebitda) of 275 million euros and an Ebitda margin of 30 are retained. In the next week the group will announce its figures for the third quarter.
The pessimistic outlook weighs on investor confidence in the company, says DZ Bank analyst Michael Punzet. He is therefore downgrading the stocks to “Sell” from “Buy” and lower the fair value to 90 from 145 euros. The share had gained wings in the summer after the Handelsblatt learned that Varta will supply the sports car manufacturer Porsche with high-performance batteries in the future.
Individual values in focus
United Internet: The German telecom billionaire Ralph Dommermuth is considering taking over the Internet and mobile communications provider he founded. Specifically, it is about an increase to 51 percent from the current 42 percent at a price of 35 euros per share, according to a mandatory announcement published on Thursday evening by the company. The share gains more than four percent in the MDax. Dommermuth is also the head of the group.
Uniper: The increased natural gas prices are pushing the energy company’s business. Adjusted for special effects, earnings before interest and taxes (EBIT) rose to 614 million euros in the first nine months. Adjusted consolidated net income also rose by more than half to 487 million euros. The shares of the energy company rose in the MDax by almost a percent and were more expensive than ever at 39.34 euros. Then profit-taking began.
Rheinmetall: The auto supplier and defense group sees itself on the upswing despite clouded sales expectations for 2021. The final figures for the third quarter made investors optimistic, with stocks gaining up to three percent. Rheinmetall has had a solid quarter, even in the auto sector, said a dealer.
Axa: A billion dollar share buyback lifts Axa to the top of the Paris CAC40. The insurer’s shares rose by a good three percent in the morning to a four-year high of 26.35 euros. The purchase comes 15 months earlier and its volume is 70 percent higher than expected, comments analyst Philip Kett. At the same time, growth was a positive surprise, while disaster claims payments were lower than expected.
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