market report
As of: 09/26/2022 6:16 p.m
In a difficult news environment, investors showed courage at times – and in the end lost out again. Bears rule in New York, too.
At the start of the week, the DAX had repeatedly struggled against the weak environment. In the end, however, the leading German index drifted into the red and closed 0.46 percent lower than on Friday. Persistent fears of interest rates and recession, currency turbulence and the uncertainty following the elections in Italy caused many investors to move to the sidelines again.
Strong recession signals
This was not least due to the growing evidence of an impending recession. The ifo business climate, Germany’s most important leading economic indicator, collapsed in September to 84.3 points. This is the lowest level since May 2020. Experts had expected a slowdown, but only to 87 points. “The German economy is sliding into a recession,” commented ifo President Clemens Fuest.
“The ifo business climate literally collapsed in September. This important early indicator points more than ever to a recession in the winter half-year,” says Jörg Krämer, chief economist at Commerzbank, with conviction. “Germany has become poorer due to the massive increase in the price of energy imports. We are facing an economically difficult winter.”
The so-called joint diagnosis of the four leading German economic research institutes, which will be officially presented on Thursday, apparently assumes a recession. In their joint economic forecast, the experts expect gross domestic product to fall by 0.4 percent in 2023, as the “Handelsblatt” learned from government circles. For 2022, they forecast only small growth of 1.4 percent. In their spring report, the institutes had still expected growth of 2.7 percent this year and 3.1 percent next year. However, the German economy is increasingly being burdened by the energy price crisis.
DAX still has room to go down
Not only fundamentally, but also technically the prospects for the DAX have recently clouded over significantly. With its slide to a new low for the year of 12,180 points last Friday, the index sent a sell signal and signals an intact downward trend. Investors should therefore keep an eye on the underside: “The next important support will only come in the form of the October 2020 low at 11,450 points,” emphasizes Jörg Scherer, Head of Technical Analysis at HSBC.
More casualties in New York
There is also no support from the world’s leading stock exchange in New York. The Dow Jones index of standard values started slightly lower and has extended its losses to 0.7 percent so far.
On Friday, the Dow Jones had already fallen 1.6 percent to 29,590 points – around 20 percent below its record level at the beginning of January. For technically oriented investors, this is a bad omen that marks the entry into a so-called bear market in which the pessimists take the helm.
There is no market panic after the Italian election
on the Shift to the right in the Italian elections to have the bond markets quite relaxed reacted. The risk premiums of Italian government bonds compared to Bunds rose by up to six basis points in the morning and were therefore rather moderate.
“The majority of investors had expected the success of the right-wing parties and had largely priced in the outcome in advance. Investors are also relieved that the right-wing alliance missed a two-thirds majority to change the constitution,” explain the experts at DZ Bank.
Pound at record low after ‘truss shock’
The foreign exchange market was far more turbulent today. The new UK government’s announced fiscal package triggered a sell-off in sterling. The British currency fell as much as 4.4 percent to a record low from $1.0382. The Commerzbank experts spoke of a “truss shock”.
Speculations about an unscheduled interest rate hike by the Bank of England then caused the pound to recover again. “The big concern now is that the Bank of England will be forced to respond to the pound’s plunge with an emergency rate hike over the next few days,” said Rob Gill of mortgage broker Altura Mortgage Finance. “A free-fall currency, rising borrowing costs, and a disparate government and central bank are the stuff of a banana republic.”
Porsche demand supports the overall market
The news of what is expected to be the largest IPO of the year on Thursday temporarily helped the overall market into the plus. Volkswagen can apparently issue shares in Porsche AG at the upper end of the price range in the forthcoming IPO. One of the banks involved said that orders below EUR 82.50 per share might not be considered. The issue was oversubscribed several times at this level. Because of the high demand, Volkswagen apparently wants to close the books tomorrow and not just on Wednesday. The previous sole owner of the Stuttgart sports car manufacturer is offering 113.9 million Porsche preferred shares in a range from 76.50 to 82.50 euros.
Technology stocks in demand
Numerous technology stocks such as SAP in the DAX or Aixtron in the MDAX were able to buck the trend. After the price slide, JPMorgan’s strategists see a tactical entry point in growth stocks such as technology.
“Now that prices have been trading down here, there may be an opportunity for a fresh tactical bounce,” Bank of America analyst Mislav Matejka wrote in a strategy note.
RWE signs LNG contract in the UAE
The energy group RWE signed a contract for the first delivery of liquefied natural gas (LNG) in the United Arab Emirates at the end of December. The agreement with the state-owned Abu Dhabi National Oil Company (ADNOC) provides for the delivery of around 140,000 cubic meters of gas – the first delivery to be handled via the floating LNG import terminal in Brunsbüttel. RWE spoke of a “milestone” for the development of an LNG supply infrastructure in Germany and a diversified gas supply.
VW and Umicore are investing three billion in the battery association
Volkswagen and the Belgian materials technology and recycling group Umicore are jointly investing three billion euros in the development of production capacities for battery materials. To this end, the VW subsidiary PowerCo, in which the Wolfsburg group has combined its battery activities, and the Belgian group founded a joint venture, as the two partners announced today.
VW is considering increased production of ID.Buzz
Due to the high demand for the ID.Buzz, the Volkswagen commercial vehicle subsidiary VWN is considering expanding parts of its production. However, many customers will probably have to wait a while for the electric buses they have ordered. “However, we could well imagine setting up a hub for the ID.Buzz in one of our two plants in Poland,” indicated brand boss Carsten Intra.
Vonovia wants to tap into alternative sources of finance
The Vonovia housing group also wants to finance its growth with external investors in the future. “The old way of financing acquisitions, i.e. issuing new shares, is out of the question given the low share price,” said CEO Rolf Buch of the “Börsen-Zeitung”. Partners are to be involved in the holdings in Sweden and Baden-Württemberg.
Uniper share accelerates recovery
After the price slump in recent months, more and more investors are returning to Uniper. The gas supplier’s shares rose by 22.7 percent to EUR 4.34 after falling to a record low of EUR 2.55 last week. The company was in trouble due to a lack of Russian deliveries and will be nationalized.
Varta at a new multi-year low
Varta’s papers, which had fallen by more than a third before the weekend due to overturned full-year targets, continued to fall. They lost 4.2 percent and are now as cheap as they were three and a half years ago.
Apple produces iPhone 14 in India
The US mobile phone manufacturer Apple will present its latest smartphone Build iPhone 14 in India. “The new iPhone 14 lineup introduces groundbreaking new technologies and important security features. We’re excited to manufacture iPhone 14 in India,” Apple announced today. Analysts at JPMorgan expect Apple to shift about five percent of iPhone 14 production to India, which is the world’s second largest smartphone market after China, from the end of 2022.
Qatar is Total involved in the world’s largest LNG project
Qatar is involving the French energy group TotalEnergies in another part of a liquefied gas project with which the Arab country intends to significantly increase its ability to export liquefied natural gas (LNG). The French group will thus become Qatar’s first international partner in what it says is the world’s largest liquefied gas project.
Ryanair wants to raise fares because of expensive fuel
The low-cost airline Ryanair wants in view of expensive fuel raise the prices. “The average price for a Ryanair ticket is likely to rise from 40 to 50 euros in five years,” Germany boss Andreas Gruber told the German Press Agency. Ryanair is not alone with the announced price increases: Lufthansa has already benefited from more expensive tickets in recent months and has announced higher flight prices for the rest of the year.