Düsseldorf On the German stock market the Dax its initial profits not hold: In the afternoon trading, the index is 0.1 percent in the red at 13,185 points. The daily high is at 13,330 points.
The Dax remains in the correction phase, which should only end with prices above 13,460 points – the corona high from the beginning of September last week. The previous low of this consolidation is 12,753 points, but it was only a short-term outlier. More important is the mark of 12,880 meters. Because there is currently the average price of the past 50 trading days. Should the Dax slip below, the correction should expand.
For weeks there has been a rotation in the stock market away from technology stocks and towards cyclical stocks. But this rotation is also apparently in its final phase.
“The times when all stocks from the health sector were cheered into the sky are over,” says Stephan Heibel after evaluating the Handelsblatt survey Dax Sentiment and other indicators. “And the times in which all logistics stocks are sold out are also over.” In his opinion, investors are now paying attention to which companies have come out of the crisis well and how the stocks have performed so far. “Latecomers are wanted “, so his assessment.
In the past week, the winning stocks could be found in various industries. From health (Stratec Biomedical plus ten percent) to industry (Pfeiffer Vacuum and Deutz each plus nine percent), chemistry (Fuchs Petrolub plus eight percent) and construction (Wacker Neuson plus eight percent) to the technology sector (Elmos plus ten percent): Investors are starting to differentiate. Sectors are no longer simply bought up or punished, but individual companies.
An important question for the German stock market is: what will happen to US technology stocks? Because these papers went up and down again before the weekend. However, solid company balance sheets prevented major setbacks on Wall Street. The technology-heavy Nasdaq nevertheless fell on Friday 0.6 percent to 10,853 points. The corrections to the technology favorites are likely to continue for some time.
So far, experts like those of the US bank JP Morgan the price weakness as a “good sign” because the prices of some tech stocks have risen too quickly too high. Both Goldman Sachs and JP Morgan stick to their target price for the US stock market barometer S&P 500 at 3600 points – at the current level, that would be an increase of eight percent.
But before the rally can resume, the often very difficult month of September must be ended. In addition, the US presidential election is scheduled for November 3rd. During the classic election rally that has almost always taken place these years, the US stock markets paused from early September to early October. According to the bank’s technical analysts HSBC The final phase of the election rally or the early phase of the year-end rally should not start until mid-October.
However, a look at investor sentiment also shows: Larger losses are not to be expected in the coming trading days and weeks. The mood of US investors is too bad for that. According to a survey by the American Association of Individual Investors (AAII), the proportion of bears who expect prices to fall in the future has risen to 48.5 percent.
This skeptical mood has reached the high values from March and May. In March of this year, the S&P 500 slipped to a multi-year low of 2304 points and then rose by more than 50 percent. Such a high bear share is ultimately a counter-indicator, because then many investors have already sold their shares and a lot of capital is available for a re-entry.
Another rally stage this week could be thwarted by the “witches”. On the third Friday in March, June, September and December, many futures transactions expire at the stock exchanges around the world. These are financial products such as futures or options that investors can use to bet on the future development of a share, for example.
This day is colloquially called “Witches’ Sabbath”. Professional investors then try in advance to move the prices in the direction that is advantageous for them. This often causes erratic fluctuations – and has often stalled an upward movement, at least for a short time.
Acquisitions worth billions are fueling speculation about an upcoming wave of mergers in the chip industry. This is how the Japanese technology investor sells Softbank the chip designer ARM for 40 billion dollars to graphics chip specialist NVidia. This helped the shares of the ARM rival Dialog Semiconductor at a price increase of 0.8 percent. The chip manufacturers ASM International and STMicro advanced up to 1.8 percent.
The titles of Infineon At EUR 24.40, they were at times as expensive as they were two and a half years ago. But the ARM deal is not yet dry, warned investment strategist Michael Hewson from brokerage firm CMC Markets. The UK government will look closely at the business as ARM employs thousands in the Cambridge area.
Look at the individual values
Hannover Re: The world’s third largest reinsurer Hannover Re In view of the corona pandemic and the accumulation of hurricanes and forest fires, expects sustained price increases. That makes the stock rise by 0.6 percent.
In the contract renewal rounds this year, price increases had already been implemented – by more than ten percent for contracts that were affected by damage. But that is not enough because, in view of falling investment income, the industry is increasingly dependent on the contracts themselves being profitable.
Metro: The major Czech shareholder Daniel Kretinsky von Metro wants to increase the wholesale group to more than 30 percent and has submitted a takeover offer. For the holding company EP Global Commerce (EPGC) of the investors Kretinsky and Patrik Tkac it is the second attempt within a year to increase its influence on the Düsseldorf group. At that time it failed because of the resistance of the other major shareholders Beisheim Holding and Meridian Stiftung.
The new offer is expected to be EUR 8.48 per common share, only half of the offer of EUR 16 at the time. However, the price of the Metro ordinary share fell to 8.31 euros by Friday. The offer increases the share by 6.6 percent to EUR 8.86, which is above the takeover offer.
Corestate: After a capital increase of almost 75 million euros, Corestate shares take over the top of the SDax. The titles of the real estate company rise by 12 percent to 20.10 euros. “Apparently investors are relieved that the company has more money available and reduced debt,” says a stockbroker.
German living: The early completion of a share buyback program is weighing on the shares of Deutsche Wohnen. The papers give in 2.6 percent and are the biggest loser in the Dax. The company prematurely terminated its share buyback program, which actually ran until October 30th. It was almost 80 percent used.
Look at other asset classes
The decline of the Turkish lira continues. In return, the euro is quoted on Monday at a new record high of 8,900 lira.
The rating agency Moody’s lowered its thumbs for Turkey on Friday and lowered its rating for long-term liabilities to “B2” from “B1”. Investors should read the rationale more closely: “As the risks to Turkey’s credit profile increase, the country’s institutions seem unwilling or unable to effectively address these challenges“, It said of the Rating agency in a statement.
The reason for the downgrading is the increasing risk of a balance of payments crisis in Turkey. A balance of payments crisis occurs when a country can only maintain its standard of living through massive capital inflows from abroad. Experience has shown that international investors withdraw their deposits in response to suspected over-indebtedness in a country, which would worsen such a crisis. This can immediately lead to a currency crisis.
Turkey’s trade deficit rose 170 percent to $ 6.31 billion in August, according to data from the Department of Commerce. In contrast, the country’s currency reserves on the Bosporus have been falling for years. In addition, the central bank has tried unsuccessfully to defend the lira against the dollar since early 2020.
Turkey also faces an increased geopolitical risk that could accelerate any crisis – its relationship with the United States, the European Union and the tensions in the Eastern Mediterranean.
Speculations about production losses in the Gulf of Mexico are driving the oil price up. The Brent variety from the North Sea rose by 0.3 percent to $ 39.95 per barrel. A few weeks after hurricane “Laura”, “Sally” endangers oil production in the region. The planned reopening of Libyan export terminals is slowing the rise, however, says analyst Jeffrey Halley from brokerage firm Oanda.
What the chart technique says
“Chart technical no man’s land” is the term used by technical analysts for the current DAX situation. This should only change in the short term if the index should rise above 13,460 points. The new Corona high has been there since last Thursday, the highest score since the crash in mid-March of this year. The value goes very well with another brand: It is the downward price gap from the month of February, when the corona crash started.
Such downward price gaps occur when the lowest point on a trading day is above the highest price on the following day. According to chart analysis, this is considered an important resistance. In this specific case, this resistance would be overcome if the Dax climbed above 13,501 points. Should the Dax close this gap, there is much to be said for a new record high, which is currently at 13,795 points.
This “chart-technical no man’s land” would also end in the short term, when the Dax falls below the 12,880 mark. Because there is currently the average price of the past 50 trading days. This line is an indicator of the medium-term trend. This fits the high from June with 12,913 points. A break in this support is likely to result in further price losses.
However, should the stock market barometer fall below the mark of around 12,200 points, the entire positive trend from a technical chart point of view would be in danger. This is where the 200-day line, which is important for long-term investors, lies at 12,197 points.