Dax drops below 14,000 points

Frankfurt Dax gave up some of its gains on Friday after the US stock market opened and fell below 14,000 points: the leading German index rose 0.7 percent to 13,982 points. The barometer reached 14,161 points on Friday.

The initial boost was provided by the fact that China unexpectedly cut its key interest rate in the real estate sector for long-term loans. The authorities are trying to revive the housing market and counteract a significant economic slowdown as a result of a restrictive “zero-Covid” policy with numerous restrictions. This created a purchasing mood in Asian markets.

Investors are apparently getting used to the fact that there is no clear trend in these weeks. In the last week of trading, Dax rose to 14,226 points and then dropped to 13,683 points. It was similar in the previous week, there were almost 1000 points between the high and low levels.

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It is difficult to draw the right conclusions from the course. At least it has become clear that even relatively minor events in the stock markets still spur bigger movements.

The US specifications were decisive for trade this week. Worries about the economy caused the major Wall Street indices to collapse and the swings in standard values ​​were enormous. This has spread to markets in Europe.

Trading on Friday had another special feature in store: a slight decline in futures markets. Index options and individual stocks expire. Dax options, which are always settled at 1:00 p.m., this time they expired after 14,151 points.

Prices tend to be above average on such days as investors want to move the price of the securities they hold the derivative in in a favorable direction. This was only partially the case on Friday during the general recovery.

This is also reflected in the trading volume. By the end of the trade, “only” 60 million were sold. This speaks against a broad recovery – but rather for short-term investors and bargain hunters. In the last small expiry days, the volume at the end of trading was between 80 and 100 million shares.

A review of the Stock Street stock exchange portal shows that the largest expiring put position on Dax – thus protecting investors from falling prices – amounted to 12,500 points. So this position was irrelevant. Dax also didn’t come close to the next bigger puts at 13,000, 13,500 and 13,800 points. Larger positions were also seen at 14,100 and 14,200.

Lots of connection options without impact

A large part of the call options that futures market specialists used to increase prices also ranged from 13,800 to 14,200 points. Another larger 14,500 point call option was unaffected, as well as all positions above this option.

There was generally high shopping interest in between 13,500 and 13,800 points in the past two weeks. The failures in this direction were short-lived. Stock market data show that some put options were closed at 13,500 points. So the hedges did their job.

The small expiry days have a much smaller market impact than the Witches’ Sabbath, a large expiry day every three months. Both options and futures contracts expire on these days.

American stock market expert Koch: “Fear Dominates Wall Street”

Meanwhile, Wall Street investors remain concerned about the dampening effect of rising inflation on the US economy. Goldman Sachs strategists now see a 35 percent chance the US economy will enter recession in the next two years, while the latest Morgan Stanley study puts the likelihood of a recession in the next 12 months at 25 percent.

Meanwhile, pessimism, especially among US investors, is so strong that it should begin to support the contraindications for stocks, analysts say. In earlier periods, such downturns in sentiment were often followed by a strong rebound. However, according to research by the Landesbank Hessen-Thüringen (Helaba), it is also imperative that economic expectations improve again soon.

Stock valuations signal relaxation

Meanwhile, according to Helaba, the valuation situation improved. Dax is currently trading slightly below its fair value, the S&P 500 has limited its mass markdown temporarily and is now at the high end of its long-term normal range. Even if a further fall in prices and a fall in valuations cannot yet be ruled out, selling pressure should gradually ease.

According to Helaba experts, periods of weakness offer long-term investors in particular the opportunity to build a position. In the fourth quarter, analysts expect a Dax level of 16,000 points, for the US S&P 500 index at 4,950 points. According to S&P, this would be a 27 percent increase in prices.

JP Morgan’s large bank not only sees shadows as well. “We can get out of this hole,” Marko Kolanovic, co-director of analysts, told Bloomberg. “There will be no recession this year. Over the summer, consumption will increase as economies reopen and China will expand its monetary and fiscal measures. “

Most of the bad things have already happened this year, explained Kolanovic. These included the Fed’s shift in monetary policy and its generally aggressive response to high inflation. The expert also cites higher raw material prices in Europe as a result of the war.

Kolanovic sees significant opportunities in terms of innovation, biotechnology and international growth actions. He recommends staying away from defensive companies such as dividend payers and commodity producers as they are expensive.

Private bank sees “serious reset”

Markets are now coming to terms with this new post-Corona landscape, which is characterized by tighter consumer and corporate budgets and higher capital costs, analyzes private bank Merck Finck. 2022 will be the year of a “big reset” for both tech and non-tech companies.

Again, according to a private bank, wheat will be separated from the chaff because sustainable growth is based primarily on solid balance sheets, adequate margins and high cash flow, especially in difficult times. Investors should pay attention to these aspects and not just to the sometimes expensive, utopian growth rates. In such a case, technology stocks would still have more than reasonable importance in the portfolio and would continue to make attractive contributions to future profits.

Gold prospects

The increase in risk aversion in the markets is currently favorable for the price of gold. The precious metal has returned some distance from the $ 1,800 level to which it recently fell. An ounce of gold currently costs $ 1,884.

A particularly strong dollar has recently become the main negative factor triggered by the interest rate change initiated by the US Federal Reserve. Already the last cycle of Fed interest rate increases, which began in 2015, showed that the dollar peaks were accompanied by gold price lows, Helaba analysts note.

On the other hand, the precious metal remains popular as a hedge against inflation and a generally popular investment in uncertain trading phases. This double protection could fuel gold again in the coming months. Helaba experts set the $ 1,800 price target for the rest of the year.

Focus on individual values

Richemont: The group of luxury goods overcame the corona crisis in the financial year 2021/22. Thanks to the recovery in consumption, profit rose 61 percent to 2.08 billion euros, the Swiss group announced on Friday. According to a survey conducted by Refinitiv, analysts expected a surplus of EUR 2.75 billion. Shares lost 13 percent. This also affects other European luxury stocks. Hermes, LVMH, Moncler and Kering temporarily fell between 3.4 and 1.7 percent.

Credit Suisse: Moody’s lowered Credit Suisse’s outlook to negative from stable. The rating agency has lowered earnings expectations for 2022 and expects profitability to remain low in 2023 due to expected litigation laws and a decline in wealth management and investment banking revenues. Nevertheless, this share increased by 0.8%.

BVB: Borussia Dortmund is parting ways with coach Marco Rose at the end of the season. Although BVB finished second in the Bundesliga, the season as a whole was very disappointing. The change of coach seems to be useful for investors: BVB titles gained 4.3%.

hello fresh: Hellofresh, the recipe mail order firm, was on a recovery course at the end of the week, the title surged significantly and ended up 4.8 percent positive.

Here you can go to the Dax price page, here you can find the current highs and flops in Dax.

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