FRANKFURT “As the US Federal Reserve is likely to raise key interest rates again by 75 basis points at the start of a trading week, investors’ ambition to buy stocks is understandably limited,” commented equity strategist Jürgen Molnar of RoboMarkets. Investors’ caution was lined with Ifo’s weak business climate, which, however, did not stand in the way of Dax’s recovery. The Ifo index, the most important leading indicator of the economic situation in Germany, revealed in July a surprisingly marked deterioration in sentiment in the German economy – it fell to a two-year low.
The other indices also recovered after a weak opening: the MDax for medium-sized companies recently lost only 0.05 percent to 26,762.27 points, while the leading euro zone index EuroStoxx 50 turned positive and 0.41 percent to 3,611, won 23 points.
The new week is devoted to the US Federal Reserve, which was also emphasized by experts from the Swiss bank Credit Suisse. Currency keepers of the world’s largest economy are likely to announce another key rate hike on Wednesday. Recently, concerns about an increase by a full percentage point have clearly subsided, but have become noticeable in the meantime – most experts expect 0.75 percentage points.
According to strategist Molnar, rising interest rates have made stocks less attractive as a paper of risk “especially in geopolitically and economically uncertain times.” However, “surprisingly positive corporate quarterly reports could counter this, as it would make stock market valuations pleasant for investors again, even in an environment of rising interest rates.”
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In the German market, the focus was on a surprising change in Volkswagen (VW) leadership. Preference shares of the car maker and main shareholder Porsche SE lost 1.8 and 2.1 percent, placing them at the bottom of Dax. Following the close of the stock market on Friday, VW announced that CEO Herbert Diess would leave in early September and be replaced by Oliver Blume, head of Porsche AG, a sports car subsidiary. Bernstein analyst Daniel Roeska has criticized the timing as inappropriate given the challenges ahead. On the other hand, Jefferies analyst Philippe Houchois highlighted the possibility of rethinking corporate strategy.
Meanwhile, Bechtle’s titles at the MDax top rose five and a half percent after the IT service provider saw quarterly earnings surge despite a supply bottleneck. For the Baywa conglomerate, which is listed on the SDax small-cap index, key data secured an almost 7% rise in prices and a top spot.
Otherwise, analysts’ comments moved the rates. Merck KGaA shares rose 1.5 percent after the positive Jefferies survey. According to expert Peter Welford, the sustainability of growth in the life sciences sector has not yet been sufficiently recognized on the stock exchange. He also believes that the healthcare portfolio is undervalued and that concerns in the electronics segment are exaggerated.
In contrast, Uniper papers lost eight percent as an MDax taillight. US bank JPMorgan cut it twice and now expects weak price development compared to the sector. Analyst Vincent Ayral drastically lowered the target price from EUR 32.00 to EUR 5.50. Welcomes the federal government’s bailout for a failing energy company. However, he is critical of the capital increase at the issue price of EUR 1.70 per share, excluding shareholders’ subscription rights and the multi-billion obligatory convertible bond. According to Ayral, uncertainty about the massive dilution of stocks for existing shareholders is driving stocks to continue to grow negatively.
At the asset management firm DWS, shareholders had to deal with a price drop of almost one percent after Jefferies analyst Tom Mills canceled his buy recommendation. Contrary to the brief drop in prices in the first half of 2020, traditional asset managers would now need to defend their profit margins in an inflationary environment while investing in strategic growth initiatives.
— Gerold Löhle, dpa-AFX —