(threatened US tariff increase for EU vehicles added)
FRANKFURT (dpa-AFX) – After a shortened trading week at the end of the month, the DAX is likely to remain susceptible to fluctuations at the start of May. In view of the Iran war, investor sentiment continues to depend largely on the development of oil prices. Meanwhile, negotiations between Iran and the USA appear to be deadlocked.
New trouble for the German stock market also came on Friday from the customs issue, which has recently disappeared from the eyes of investors. In the new week there will be a significant increase in US tariffs on vehicles from the EU. This is likely to particularly affect German car manufacturers. The European Union and business are sharply criticizing the tariff increase announced by US President Donald Trump. The EU Commission reserves the right to take countermeasures if Trump actually follows through on his announcement.
Oil prices have recently returned to very high levels. However, the hope among investors is that the momentum of the increases will weaken, wrote market analyst Timo Emden. “Many investors have now gotten used to the noise of the crisis,” he added. However, the Strait of Hormuz, which is so important for global oil trade, is likely to remain blocked for a long time. Reports of possible US military operations in Iran increase uncertainty. US President Donald Trump is said to be preparing air strikes to advance stalled negotiations.
“Every week that passes in the diplomatic blockade brings the global economy closer to energy gridlock,” commented Ulrich Kater, chief economist at DekaBank. As oil prices rose, inventories decreased. The announcement by the United Arab Emirates (UAE) that it would withdraw from the OPEC oil cartel after more than fifty years of membership does not help either. “Even if supply from the UAE were increased in the short term, exports would remain limited by the conflict,” warned Kater.
LBBW chief economist Moritz Kraemer also warned of long slowdowns caused by the war. In the short term, a peace agreement between Tehran and Washington does not seem likely. If an agreement were to come about, it could always turn out to be a false peace in retrospect. “Even if a peace agreement turns out to be sustainable, the economic consequences of the war will be with us for quite some time,” said Kraemer.
Europe is likely to be hit harder than the USA, said analyst Andreas Lipkow from broker CMC Markets. The robust development of the US economy is reducing the likelihood of stagflation, i.e. increasing inflation while the economy stagnates. Europe, on the other hand, may already be at the beginning of this development. According to Lipkow, this makes it more difficult for the European Central Bank (ECB) to keep inflation in check without slowing down the economy. Most recently, the ECB left the key interest rate untouched, just like the US Federal Reserve Bank.
In this mixed situation, the DAX remains relatively stable. “Imagine there is a crisis and no one is going anywhere,” wrote Jens Herdack, an analyst at Weberbank. “Despite clouded consumer sentiment, the stock markets are doing very well.” There had even been records recently on the US stock exchanges.
Herdack also expects a very positive reporting season. In his opinion, corporate growth in Europe is likely to be weaker than in the USA. However, he assumes that companies in this country will also beat the very conservative estimates. Over the course of the week, the quarterly figures from more than a dozen DAX companies will be available – including Infineon, Rheinmetall and BMW.
In addition, investors are likely to pay particular attention to the US labor market report at the end of the week. It is considered one of the most important factors for the future monetary policy the US Federal Reserve Bank. In this country, the focus is on order and production data from German industry in March on Thursday and Friday. Incoming orders from US industry are already on the agenda at the beginning of the week./niw/tih/he
— By Nicklas Wolf, dpa-AFX —
