Frankfurt As a result of the corona crisis, many investors have since lost sight of the conflicts between China and the United States. But new tensions between the two countries could weigh on the equity markets. Investors fear that the recent recovery rally may run out of steam and that they may have to expect stronger fluctuations on the stock markets in the near future.
On the other hand, positive news about possible corona vaccines and the Franco-German EU aid package had led to rising prices in the past week. Chancellor Angela Merkel and France’s President Emmanuel Macron presented a joint plan for an aid package worth EUR 500 billion for EU members who are particularly affected by the corona crisis. Several pharmaceutical companies have also reported advances in coronavirus research.
On a weekly basis, the Dax therefore climbed by around six percent and closed at 11,074 points on Friday. The US stock markets also saw price gains in the past week, but also largely came to a standstill on Friday.
The current easing of the corona measures, which for many people means a small step towards normality, also contributed to the positive mood in Germany. As of next week, hotels in Berlin and Brandenburg, for example, will again be able to accept guests and the entry ban for guests from other federal states will end in Mecklenburg-Western Pomerania.
However, investors are also unsettled by the fact that virologists may have to prepare people for rising infection numbers and that the pandemic is not yet over. “To ensure that the markets get a further tailwind after the first recovery, we believe investors need more confidence that a second wave of infections will not lead to renewed lockdowns,” said Mark Haefele, chief investment strategist in global wealth management at UBS.
Success of the opening measures crucial
The further price development depends on the course of the pandemic, in particular on the success of the opening measures, DZ Bank analyst Christian Kahler also says: “If these are delayed, it is possible that the bottom has not yet passed and the economy and stock markets remain under pressure. “Investors would have to be prepared for increased volatility until the crisis is resolved economically and medically.
According to Haefele, the heated rhetoric between the United States and China could also contribute to fluctuations on the international stock markets. If the conflicts between the two countries increase again, this should put an additional burden on the global economy in the corona pandemic. China currently doesn’t even dare to set a growth target for the world’s second largest economy.
The planned security law of the People’s Republic for its Hong Kong Special Administrative Region has also caused a sensation. This would further increase Beijing’s influence on the autonomously managed zone. Protests by the population could flare up again.
US President Donald Trump warned China that the US would react “very clearly” when in doubt. Previously, he had already accused the country of dealing with the corona crisis with a “massive disinformation campaign”.
Impoverished recovery of the economy
Regardless of this, Commerzbank equity strategist Andreas Hürkamp expects the German economy to recover from the crisis only “quite weakly”. For the Dax, he expects profit expectations to continue falling in the second half of the year: “It will probably take some time before the labor market, consumers and companies have digested the corona shock.”
Kahler from DZ Bank also assumes that the profits of the Dax groups will collapse further in the corona crisis. In 2020 he expects a drop in profits of over 50 percent in the Dax. “This leads to a reduction in dividends by a good third,” said the analyst.
Only thanks to the rapid and extensive reactions of the central banks and politics did the stock prices not collapse more, Kahler adds. The European Central Bank (ECB) appears to be ready to expand its emergency bond purchase program to deal with the corona crisis (PEPP) in June, if necessary, as can be seen from the minutes of the ECB Governing Council meeting published on Friday at the end of April.
So far, the program has been set up for a volume of 750 billion euros. The councilors therefore stressed that the effects of the pandemic will continue to affect growth prospects for a long time to come. Given the high level of uncertainty, the Council would have to continuously evaluate each of its measures, “both individually and as a package”.
This is why the upcoming economic data will also come into focus in the new trading week: The current Ifo index will come next Monday, for which companies will be asked about their business situation and their business expectations. On Tuesday, the market research institute GfK announced its current study on the consumer climate in Germany. In the US, consumer spending comes into focus on Friday.
Decisions from Germany
In this country, investors should also take a look at the upcoming decisions of the Federal Court of Justice (BGH). On Monday, the BGH announced a first verdict in the VW exhaust scandal. Plaintiff is an affected diesel buyer who wants to return his used car and have the purchase price back – since the car had an inadmissible shutdown device. A consumer-friendly verdict had already been hinted at at the trial.
On Thursday the BGH also wants to announce a decision against Facebook. It is about the automatic transmission of user data when games from other providers are started in the app center. The applicant is the Federal Association of Consumer Centers. Basically, it must now be clarified whether German consumer associations can still sue for data protection violations or whether only the data protection officers are authorized to do so. The BGH may want to involve the European Court of Justice.
Deutsche Börse’s index review is already casting its shadow. On June 4, the stock exchange will decide on the future composition of its important selection indices based on the May ranking. The focus is particularly on Dax member Lufthansa, which is considered a likely relegation candidate.
The airline was particularly hard hit by the corona crisis, which weighed heavily on the share price. LBBW index expert Uwe Streich describes the seriousness of the situation: “Only an immediate price jump of at least 55 percent and remaining at the price level then reached by the end of the month could still prevent the relegation to the MDax.” The best chances of advancing to the he grants the first stock exchange league to the real estate group Deutsche Wohnen.
With agency material
More: ECB seems ready for additional bond purchases