The RoboMarkets Weekly Review and Outlook – DAX With New High for the Year
Jürgen Molnar, Capital Market Strategist
05 February 2023
Sometimes, even on the stock market, you only hear what you want to hear. At least this is the impression one gets when looking at the reaction of the stock market after the interest rate hikes by the US Fed and the European Central Bank. First, it is said to have been the somewhat less “hawkish” comments by Jerome Powell after the 25 basis point rate hike that caused the interest rate-sensitive US technology stocks in particular to ignite the turbo.
And a day later, ECB chief Lagarde also makes no secret of the fact that her 50 basis point rate hike was not the last, but probably not the penultimate either. Only the markets do not believe her. They see inflation rates continuing to fall and are holding out hope for interest rate cuts in the second half of the year despite all the denials. Even the more than 500,000 new jobs created in the US labour market in January could not really unsettle investors.
Bulls Continue to Put Bears to Flight
Thus the bears, who have been suffering since October, have to let the DAX move on after a short struggle to reach the old high for the year at 15,270 points. If the scepticism about the current rally on the stock market is still so high, it is enough if a US central bank does not change its course, but the first begin to want to hear somewhat looser tones from the Fed chief and buy shares. The short squeeze that then sets in drives the others ahead of them and the picture we have seen this week emerges. As if Powell and Lagarde had announced interest rate cuts, euphoric bulls continue to beat the bears to the punch.
Meta Optimistic Again, Apple, Amazon and Alphabet Realistic
And then there was the news from Facebook parent Meta. After a difficult year with falling sales, boss Zuckerberg is now talking about a comeback and a “year of efficiency”. And efficiency in the form of cost savings also in the form of the first major job cuts in history, while at the same time returning to a growth path is music to shareholders’ ears.
The share jumps into double digits. While investors were hardly able to contain their euphoria after these strong figures, they were caught up again 24 hours later by the bitter reality, a combination of weaker demand, rising costs and a resulting need to cut costs at the once high-flying big-techs. Apple, Amazon and Google parent Alphabet all disappointed with their figures. Although for different reasons such as temporary effects from the pandemic and lockdowns in China, their figures and outlooks showed investors how uncertain the economic future is in times of high inflation and the threat of recession.
Deutsche Bank Achieves Its Most Important Goal
On the Frankfurt stock exchange, investors found the famous hair in the soup with Deutsche Bank’s figures. Spoiled by an increase in the share of almost 70 per cent since October last year, the highest profit in 15 years and a return on equity of 9.4 per cent, unimaginable until recently, were first sold. Higher interest rates were the turbo, while investment banking put the brakes on. If the issuing and advisory business emerges from the valley of tears in the next few months, however, the correction now beginning in the share could represent an attractive entry opportunity.
German Inflation Data Right at the Start of the Week
At the end of the week, the momentum of the central bank rally was gone for the time being. With a gain of more than 30 per cent since the beginning of October, the DAX is moving at a dangerous level. Monday’s postponed publication of inflation data from Germany could show whether the index will tackle the last 800 points to the all-time high or whether profit-taking will push it back towards 15,000. An increase in the consumer price index back to ten per cent is expected, so there is definitely the potential for a positive surprise.
DAX – Current Supports and Resistances
Supports: 15,300/15,250 + 15,150/15,100 + 15,050/15,000
Resistances: 15,500/15,550 + 15,700/15,750 + 15,900/15,950
This article is from RoboMarkets.