Despite dark clouds: Confidence reigns

Status: 08/08/2022 6:16 p.m

The interest rate worries that had weighed on the courses on Friday had vanished at the start of the week. The questionable financial development in Italy also played no role on the stock market today.

Investors currently seem inclined to read the most positive things out of the latest economic data. Still on Friday, the strong US labor market data in particular fed fears of interest rates, as they allow the US Federal Reserve to take a tougher stance. In the United States, the majority of market participants are currently assuming that monetary policymakers will raise the key interest rate by 0.75 percentage points at their meeting at the end of September.

On the other hand, the robust job market shows the strength of the American economy, which may be able to pick up again in the current third quarter. Concerns about possible stagflation with its negative consequences for corporate profits are thus receding into the background. In any case, investors were more willing to take risks on Monday and let the DAX rise by 0.8 percent. The leading German index is again roughly at the level it started on Friday.

Wall Street is waiting for Wednesday

The stock markets in New York are more restrained, but also with a confident tone. In the early evening, the Dow Jones was 0.3 percent higher than Friday’s close, after having already gained significantly more.

On Sunday, the US Senate had a year and a half after President Joe Biden took office Multi-billion dollar climate and social package passed. The package provides around $370 billion for energy security and climate protection and $64 billion for health care.

Market participants are now eagerly awaiting the publication of consumer price data for July on Wednesday. In June, inflation in the US rose to 9.1 percent – the highest level in over 40 years.

By early evening, the euro had re-established itself above the $1.02 mark. The economic mood in the euro area surprisingly improved somewhat in August. After a sharp slump in July, the economic indicator collected by the consulting firm Sentix rose by 1.2 points to minus 25.2 points. Analysts’ expectations were exceeded. In July, the indicator had fallen to its lowest level in a good two years.

Last Friday’s strong US jobs data supported the US dollar.

China with mixed foreign trade data

Positive economic news also came from China: The strong export growth in July of 18 percent surprised the markets. Imports rose 2.3 percent year-on-year, falling well short of the forecast of 3.7 percent.

On the market for European government bonds, yields on Italian government bonds initially rose, bucking the general market trend. The return for a term of ten years rose above the 3.0 percent mark at times. But the trade remains nervous. Bonds from the other euro countries were in demand, with yields falling significantly in some cases. German Bunds have extended their gains and are only yielding 0.88 percent.

Market observers referred to a negative comment from the US rating agency Moody’s. The agency had set the outlook for Italy’s credit rating to “negative” on Friday evening. This means that Moody’s can lower the rating, i.e. the assessment of creditworthiness, from the current Baa3. The current rating is just one notch away from the so-called “junk zone” used to denote risky assets. “The risk of a further downgrade to junk is increasing in view of the possible political situation after the elections on September 25,” commented Dekabank’s bond experts on Moody’s decision. Italy faces general elections following the resignation of Prime Minister Mario Draghi.

Oil prices rebounded in the evening but remain near six-month lows from the week’s close. Market participants will continue to closely monitor the situation in China, one of the world’s largest oil consumers. Above all, the strict corona lockdowns there keep fueling fears of an economic slowdown and thus a drop in demand. In the morning it became known that further areas on the island of Hainan, which is popular with holidaymakers, were cordoned off in view of the corona outbreak there.

Bayer stock once again stood out among the few weaker DAX stocks. It was the third negative day in a row for the shares of the Leverkusen-based pharmaceutical and agrochemical group since the publication of the quarterly data in the previous week and a total loss of around ten percent. Above all, the impending legal risks in the USA in the course of the Monsanto takeover continue to have a negative impact.

The replacement of Group boss Herbert Diess is changing the balance of power at Volkswagen: the Porsche and Piech families, who call the shots at Europe’s largest car manufacturer via Porsche Automobil Holding SE, want to be more involved in decisions than before, as from the environment of the supervisory board could be heard.

“They want to have a closer look at the implementation of the strategic guidelines,” said an insider of the news agency Reuters. The future CEO Oliver Blume, the preferred candidate of the Porsche Piech clan, should pay more attention to the operative business than his predecessor. Blume should also lead the change initiated by Diess to a leading mobility service provider in calmer waters, according to the families’ wish. However, investors and industry experts object to the fact that the Porsche boss should have a dual function in the future.

Due to the uncertainty caused by the war in Ukraine, VW-Holding Porsche SE continues to believe that both a decline and a significant increase in profits are possible this year. The holding company, through which the Porsche and Piech families hold the majority of voting rights in the Wolfsburg car group, confirmed its forecast of net profit before taxes in a wide range between 4.1 and 6.1 billion euros. In 2021, Porsche SE had almost doubled its profit to 4.6 (previous year 2.6) billion euros.

In the first six months, net profit, which is mainly due to the stake in Volkswagen, rose by 31 percent to 3.2 billion euros. Of this, 3.1 billion euros flowed from Volkswagen to the holding company.

In the course of the planned IPO, Porsche Holding intends to acquire 25 percent plus one share of the ordinary shares in Porsche AG. This would give her a blocking minority. Up to 25 percent of the non-voting preference shares and thus 12.5 percent of the total capital are to be placed on the capital market. About half of the proceeds from the IPO are to flow to the shareholders as a special dividend. Porsche SE did not comment on the exact schedule of the IPO, which is planned for the final quarter.

The energy technology group Siemens Energy continues to struggle with losses. For the third quarter of the 2022 financial year, the energy technology group reported a loss after taxes of 533 million euros. This was caused by burdens from the restructuring of the business in Russia and renewed losses at the Spanish wind energy subsidiary Siemens Gamesa. In the same period last year, there was a loss of 307 million euros in the books. For the year as a whole, the group expects a loss that will exceed the previous year’s level of minus 560 million euros, almost in the amount of the charges in connection with the restructuring of the Russian business. Especially in connection with the problems in Russia, the special effects would have added up to minus 298 million euros in the quarter.

The financial service provider Hypoport is sticking to its annual targets despite the significant rise in interest rates on real estate loans. However, higher interest rates, an impending recession and a lack of material in the construction industry could “lead to longer marketing cycles for real estate financing” in the second half of the year. In the second quarter, Hypoport increased its sales year-on-year by a fifth to EUR 126 million. The surplus rose by 32 percent to almost ten million euros.

BioNTech continues to benefit strongly from the high demand for its corona vaccine. In the first half of the year, the Mainz-based company turned over 9.6 billion euros. The half-year profit amounted to 5.4 billion euros. However, sales and earnings per share in the second quarter fell short of estimates at EUR 3.2 billion and EUR 6.45, respectively. Analysts had expected an average of 3.96 billion and 7.44 euros per share.

For the year as a whole, BioNTech is aiming for sales of 13 to 17 billion euros. The preparation for the market launch of two new vaccines adapted to new corona variants was “in full swing,” said the company. The delivery of the vaccines could begin “subject to official approvals” from October. The product pipeline also includes next-generation vaccine candidates aimed at longer and broader protection against the virus, according to company boss and founder Ugur Sahin. In 2021, BioNTech had achieved sales of almost 19 billion euros. The net profit was almost 10.3 billion euros.

The crisis in technology stocks with a collapse in valuations has pushed the Japanese major investor Softbank deep into the red. From April to June, a loss of 3.16 trillion yen (the equivalent of almost 23 billion euros) was incurred. In the same period last year there was still a profit of around 5.5 billion euros on the balance sheet.

The Vision Funds alone, which dominate the business activities and which, among other things, have stakes in the ride-hailing agency Didi, the online retailer Coupang, the Uber competitor Grab and Alibaba, came in at a minus of more than 21 billion euros in the three months. This was also due to the decline of SenseTime, an artificial intelligence startup, and the robot company AutoStore.

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