The leading German index, the DAX, initiates a stabilization course at the start on Monday.
The DAX started Monday trading up 0.28 percent at 15,874.15 points, stabilizing somewhat after the losses of the past few days.
Russia news at a glance
Geopolitical developments will be the main focus on Monday. Investors are expecting unrest on the foreign exchange and commodity markets after the aborted mercenary uprising in Russia at the weekend. Some expect a flight to US Treasuries or the dollar and volatility in commodity markets, which are seen as sensitive to political shocks from Russia.
ifo index at the start of the week
The widely acclaimed German ifo business climate will be published on Monday morning. Dekabank chief economist Ulrich Kater expects another significant decline. “It’s not going well in Germany,” said one comment. It is true that consumer demand will pick up in the future as a result of falling inflation and faster rising wages. “However, rising wages are a burden for companies,” commented Kater. “In addition, contrary to many expectations, the interest rate peak does not seem to have been reached yet.”
According to the Commerzbank experts, according to the latest purchasing managers’ indices, it is likely that the ifo business climate fell further in June after having fallen again for the first time in the previous month after six increases in a row. “Obviously, companies are increasingly feeling that the general economic conditions have deteriorated noticeably in recent months,” emphasized Martin Hartmann from Commerzbank. A recent increase in the number of profit warnings from German companies underscores this.
DAX with a losing streak in the past week
The DAX will probably have to continue to be measured at 16,000 points in the coming days. At the end of June, the round mark should remain the linchpin of whether the recent losses are just a countermovement at a record level or the start of a larger correction. According to Helaba, there is currently not much left of the euphoria among investors. Recently, the fear of interest rates that has resurfaced is hampering investors’ willingness to take risks.
“For the first time this year, the signs are selling,” said capital markets strategist Jürgen Molnar of broker RoboMarkets in light of the latest losing streak, which grew to a fifth day on Friday. The leading index has already moved more than 600 points away from the record of 16,427 points. According to Molnar, the next key support is now at 15,700 points. Relief will probably only come when the DAX not only tests the 16,000 mark, but is able to overcome it again.
Central banks have spoiled the mood
According to chief economist Ulrich Kater from DekaBank, the latest profit-taking was “mainly due to new warning signs from the central bank camp”. Both the US Federal Reserve and the European Central Bank had recently indicated that further interest rate hikes would be necessary. The sometimes unexpectedly significant increases in key interest rates in Great Britain, Norway and Switzerland have recently reminded investors that the international interest rate spiral is continuing.
According to Kater, the inflation figures are falling, but this is only being driven one-sidedly by normalized prices for energy and intermediate products. This effect is finite, and so inflation could soon pick up again, for example through higher wage agreements. “The stock markets have to process these new interest rate perspectives first,” added Kater. The effects on the economy would then also be important. “If this proves to be relatively stable in the coming weeks, the markets could quickly turn up again.”
Important dates this week
Now that the major interest rate decisions have been made, there are fewer highlights on the agenda for the next few days. New impressions of how much pressure the European Central Bank (ECB) is under in its fight against inflation could be seen on Thursday and Friday in Germany and the euro zone convey upcoming consumer prices for June. Although Commerzbank expects inflation to rise moderately in Germany to 6.3 percent, it expects it to fall to 5.5 percent in the euro zone.
DAX still clearly up for the year
In June, the leading index is still showing a moderate plus, in the year to date even almost 14 percent. According to Helaba, it can be said that “contrary to expectations, the first half of the year went well above average for equity investors”. With such gains behind us, the further development can be observed carefully, especially since German standard stocks continue to tempt with their moderate valuation. Experts keep emphasizing that how investors who missed the rally act becomes crucial. Most recently, they too hesitated to get involved.
With the change to July, the change to the second half of the year is also due in the coming days. On the equity side, this could bring with it the potential for a change of investor favorites as large investors take profits on stocks that have performed well and potentially rebalance their positions at the end of the quarter. In addition, in July comes the famous “summer slump” with reduced volumes during the holiday season.
Editorial office finanzen.net with material from dpa (AFX) and Reuters