Why the Dax is rising more than four percent

On the stock exchanges, the hope for peace in Ukraine currently outweighs the fear of a further escalation, says Thomas Altmann, portfolio manager at asset manager QC Partners. “The Dax is also benefiting from this tailwind. Shares will be bought again in the hope of further progress in the negotiations.”

The German stock market had already reacted to such statements with significant gains in the past: since Tuesday of last week, the Dax has gained more than 1600 points or twelve percent.

The lower oil price will also have a supportive effect on Wednesday. Tailwind is also coming from China: Prices there rose significantly after the government in Beijing announced further economic incentives.

In addition to the developments in the Ukraine war, investors will look to the USA after the market close, where the US Federal Reserve will announce its interest rate decision. A rate hike of 0.25 percentage points (25 basis points) is considered agreed. It will probably stay that way. “The market estimates the probability of an interest rate hike of 50 basis points at just 3.7 percent,” says Jochen Stanzl, an analyst at broker CMC Markets.

The new dot plot is also important. This shows how many interest rate hikes the central bankers are expecting this year and also in the coming years. “Currently, the consensus expectation for this year is seven interest rate steps and thus one rate hike at each interest rate meeting,” says Altmann. Therefore, the central bankers could almost only surprise on the upside.

>> Read about this: The US Federal Reserve meets: Why Fed Chair Powell will raise rates.

Why the 14,000 mark is important

The Dax has been working its way through the 14,000 point mark since last Wednesday. Profit-taking always started around this level, so that the Frankfurt stock exchange barometer never managed to break the 14,000 points in the long term. Persistent means at the end of the day and on the following trading day.

As a result, the 14,000 mark has become a resistance. It is not unusual for such resistance to be overcome only after several attempts. If this succeeds, it is considered a positive signal and has a trend-confirming effect.

However, further hurdles await the Dax before it ends its long-term downward trend. The next point of contact is the still open downward gap from February between 14,568 and 14,586 points. Down gaps occur when the high of the trading day is below the low of the previous day. If these gaps are not closed, this is considered a sign of weakness and further falling prices.

Open gaps are turning into resistance from a technical point of view. In this specific case, the Dax would have to rise to 14,586 points in order to break through this resistance. That would be another sign of stabilization. “But for a noticeable relief, it would have to be 14,980 points,” explains Martin Utschneider, Head of Technical Analysis at Donner & Reuschel.

Oil price stabilizes

Oil prices edged up again on Wednesday after falling sharply in the previous days. Brent crude oil from the North Sea rose 0.3 percent to $100.18 a barrel around midday. The price of US oil WTI rose 0.7 percent to $ 97.11 per barrel.

This means that oil prices are only slightly higher than before Russia attacked Ukraine. They rose sharply after the invasion, reaching their highest level since 2008. A barrel of Brent cost almost $139 at its peak, and a barrel of WTI traded at more than $130. Russia is one of the largest producing countries in the world.

>> Read about this: “Triple market deficit” – Ukraine war causes oil prices to fluctuate extremely.

“Following the two-day sell-off in oil markets, traders are awaiting further clues from the ceasefire talks,” said Tina Teng, an analyst at online brokerage CMC Markets, regarding the Russia-Ukraine negotiations. Crude oil prices could come under renewed pressure as high inflation will ultimately impact economic growth and weaken demand.

Relief rally in China stocks

After three trading days with significant losses, China shares are on the up again on Wednesday. The “Hang Seng Enterprises” index, which tracks the most important Chinese stocks listed in Hong Kong, rose by up to 13 percent on Wednesday. That’s the biggest intraday gain since the 2008 financial crisis. Tech stocks like Alibaba and Tencent were up more than 20 percent in some cases.

The rally was triggered by a report by the state news agency Xinhua, which cited a meeting with Vice Premier Liu He. Accordingly, China wants to keep the stock market stable, prevent companies in the mortgage sector from going bankrupt and help domestic technology companies with an overseas listing. This addressed a number of the most recent stress factors.

>> Read about this: Recovery in Chinese stocks in Hong Kong and the US – but no reason to sound the all-clear.

Russia is threatened with bankruptcy

A default by Russia could soon be imminent. In the course of the day, interest on two dollar bonds with a total volume of 117 million dollars is due. Because of Western sanctions in response to the invasion of Ukraine, it is unclear whether Russia will make the payments and whether it will be in dollars or rubles.

“The ability or inability to meet our commitments in foreign currency equivalents does not depend on us,” Russia’s Finance Minister Anton Siluanov said in an interview with RT Arabic on Wednesday. Russia’s international cash reserves in foreign currencies have been frozen as part of Western sanctions.

According to the rating agency Fitch, should Russia service the two-dollar bonds in the sharply devalued ruble, after a 30-day grace period, this would be considered a state bankruptcy.

Several rating agencies had recently pushed their ratings for Russia’s creditworthiness deep into the junk zone. However, the International Monetary Fund (IMF) considers serious consequences for the global financial system in the event of a state bankruptcy in Russia to be unlikely.

>> Read about this: Why a state bankruptcy in Russia can hardly be avoided.

Look at the individual values

In the MDax, the shares of the medical technology group Carl Zeiss Meditec benefited from a buy recommendation from the Swiss UBS with an eight percent premium. In the SDax, surprisingly strong annual figures brought the IT service provider Nagarro a price increase of almost nine percent. The laboratory service provider Synlab went up by two percent after unexpectedly good figures and an increased sales forecast.

BMW: The carmaker expects significant burdens from the Ukraine war. This year, the group is assuming that the profit margin before interest and taxes in the car business will be seven to nine percent due to the effects on its own production, as the Munich company announced on Wednesday. Previously it had been eight to ten percent. The stock is up more than 3 percent.

eon: The energy company’s stock is one of the few stocks not benefiting from the good mood. Eon increased its profit in fiscal 2021. Adjusted Ebitda rose by EUR 1 billion to EUR 7.9 billion, the company announced on Wednesday. The dividend increases from 47 to 49 cents per share. Among the risks, Eon cites its stake in the Nord Stream 1 Baltic Sea gas pipeline.

Morphosys: Positive news out of the US buoyed the stocks of the biotech company before profit-taking ensued. The shares initially rose more than three percent after the Association of US Cancer Centers NCCN classified the cancer drug Monjuvi as the preferred therapy for B-cell lymphoma under certain conditions. The papers are currently trading unchanged. Morphosys will present its annual figures on Wednesday evening.

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