“Investors experience a re-evaluation of the stock market”

Düsseldorf On the German stock market, the new trading week begins as the previous one ended: with high losses. Of the Dax slipped 2.1 percent or the equivalent of 290 points in the afternoon and was listed at 13,475 points. The daily low is 13,434 points.

From Wednesday to Friday of the past week, the downward momentum had increased steadily, and the stock market barometer closed at a daily low on each of these three days. On Friday, the Dax ended trading at 13,762 counters.

For Thomas Altmann from the investment house QC Partner, investors are “experiencing a revaluation of the stock market in view of the ever-increasing interest rate expectations”. Rising interest rates are having a direct impact on corporate profits and are becoming increasingly competitive for stocks.

With these price losses of the past few days, all the important resistance that existed for the Dax had to be overcome on the way up. On the bottom, the focus is on the low of May last month at 13,380 points. From the May low, the Dax started a four-week rally that peaked at 14,709 points at the beginning of June.

The area around 13,500 points is highly relevant for the further development of the German stock market. Sustained listings below this mark should then bring the psychologically important mark of 13,000 points and the low for the year of 12,834 points back into focus.

According to investor sentiment, a countermovement is likely

Investor sentiment provides a different perspective on these price losses. Because according to the current data from the Handelsblatt survey Dax-Sentiment, the sell-off was followed by the usual extremely violent slump in sentiment. Which means: A lot of investors have already sold. Since the beginning of the survey in autumn 2014, there has always been a counter-movement with a plus of two to four percent after such a crash in the following two weeks.

But no stock exchange rule is without exception: In March 2020, in the middle of the Corona crash, a Dax crash of twelve percent followed a week with a minus of three percent and then another minus of 20 percent. But is the current situation comparable to the Corona crash?

For sentiment expert Stephan Heibel, it was “often a good idea to buy into fear and panic”. If a counter-movement takes place, one can always judge later whether the fear is justified and, if necessary, get out again.

Inflation and interest rates remain perennial issues

At least since last week of trading, it should be clear: inflation and higher interest rates will obviously remain a long-running issue on the stock exchanges. The main focus is on the unabated rise in oil prices and the higher yields on government bonds.

The price for a barrel (159 liters) of North Sea Brent may fall below the $120 mark this Monday, but the forecasts are rather gloomy. The commodity analysts of Goldman Sachs see USD 140 as likely in the further course of the year, and the Swiss commodities trader Trafigura even USD 150. This would mean that the price of oil would overshadow its level at the start of the Ukraine war. At that time, the price briefly climbed to $139.

Bond yields also remain at high levels. A US Treasury bond with a term of ten years is yielding at 3.23 percent, the German counterpart continues to rise to 1.55 percent on Monday. A look at the yields on two-year government bonds, which react particularly intensively to changes in monetary policy, shows how much the situation on the bond market has changed.

The yield on a two-year US Treasury bond is now 3.24 percent, the highest since 2007. At the beginning of this year, this figure was 0.77 percent. At 1.07 percent, two-year Bunds are currently yielding the highest rate since 2011. That was the only year in which the European Central Bank (ECB) tightened interest rates twice in the wake of the financial crisis. If oil prices and yields continue to move higher, it would be another drag on stock prices.

Bad signals are also coming from the forex market. Since ECBPresident Christine Lagarde announced interest rate hikes on Thursday, the euro has fallen almost 2 percent against the dollar. Normally, rising interest rates cause a currency to appreciate because it offers more yield.

But the European common currency has slipped to its lowest level in almost a month at 1.0474 dollars. This is not a good sign for the stock markets, because capital is flowing out despite rising interest rates. According to a report by the Financial Times (FT) is for the USA a recession is currently the consensus scenario. Presumably the market is gradually expecting something similar for the euro area.

Investors sell Turkish bonds

The ongoing economic crisis in Turkey is fueling fears of a government default. Hedging a $10 million package of Turkish bonds against default rose $12,000 to a record high of $837,000, data provider Markit said. This means that these credit default swaps (CDS) have more than doubled within a year. For comparison: For the default of a comparable federal bond, the sum total is only 12,400 euros.

At the same time, investors are throwing the country’s bonds out of their portfolios. This drives the yield on dollar bonds maturing in 2034 to a record high of 10.3 percent.

Bitcoin falls below $25,000 mark

Bitcoin has fallen below the $25,000 mark for the first time since December 2020. The oldest cyber currency slipped to $ 23.633 at its peak. Ethereum is even more downhill. The cryptocurrency is temporarily trading around 22 percent lower at $ 1,302. That’s the lowest level since December 2021. Added selling pressure was crypto lending platform Celsius Networks’ announcement that it was pausing all payouts and inter-account transfers “due to extreme market conditions.”

Look at the individual values

Steel Values: Steel stocks fell more than the market as a whole. The titles of Thyssen-Krupp, Salzgitter and Klöckner&Co. lose up to six and a half percent. Traders pointed to the danger of strikes in the steel industry in addition to the general economic concerns.

BASF: CEO Martin Brudermüller warns of the drastic consequences of a gas embargo for the chemical company. “If we are no longer allocated gas, we have a few hours to shut down the Ludwigshafen site,” said the manager of the “Süddeutsche Zeitung”. “Then the huge site would stand still for the first time in its history.” BASF-Share loses 0.6 percent.

Rheinmetall: The share gained 1.2 percent. Several of the armed forces Decommissioned but currently modernized “Marder” armored personnel carriers from the manufacturer are ready for use and could be delivered to Ukraine immediately. When and where the “marders” are delivered is the decision of the federal government.

Biontech: The US Food and Drug Administration has confirmed the safety and effectiveness of the Corona vaccine for children aged six months to four years. According to an initial analysis, the effectiveness of the vaccine in this age group is 80.3 percent. The US-based share fell 1.1 percent on the German trading platform Xetra.

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