FRANKFURT (dpa-AFX) – Regardless of the recent lows for the year, investors will probably have to prepare for further losses on the stock exchanges. In view of economic, inflation and interest rate concerns as well as the energy crisis, “it is not surprising that investors are looking for security and avoiding stocks,” writes equity strategist Markus Reinwand from Landesbank Hessen-Thüringen in his outlook for the new week. Against this background, September “again lived up to its reputation” as the long-term average worst stock market month. Reinwand’s colleague Uwe Streich from the Landesbank Baden-Württemberg fears that “a lot has already been processed in the prices that have already dropped significantly, but probably by no means everything”.
A look into the past fuels some hope for improvement. Because “with the months of October to December, the typically best quarter of the stock market year is now approaching,” says Streich. However, analysts are only just beginning to lower their estimates for corporate earnings. And with forecasts likely to be revised significantly lower, current valuations are even more flattering. Reinwand also considers a further decline in Germany’s leading index, the Dax (DAX 40), to be possible, although standard German stocks are already clearly undervalued on the basis of current valuation indicators.
“Currently there are hardly any rays of hope on the capital markets,” states Andrew Pease, investment expert at US investment and consulting firm Russell Investments. However, the already very negative mood among investors makes him cautiously optimistic about future developments. This “could be an indicator that the markets have already priced in the bad news”. This is supported by the clearly oversold Russell Investments Composite Sentiment Index, which uses a number of technical indicators, position data and surveys to measure investor sentiment for the market-wide US stock index S&P 500.
The new week is unlikely to provide any indication of the extent to which the company’s business figures and outlook are meeting expectations: In view of the reporting season for the past quarter just getting underway, the calendar looks very clear. The few exceptions include the information from the leasing specialist GRENKE on new business announced for Wednesday.
Also in the middle of the week, the British supermarket chain Tesco provided information on the first half of the financial year and the French luxury goods manufacturer Kering on sales development in the third quarter. The next day capital market events are held by the pharmaceutical and specialty chemicals group Merck KGaA (Merck) and the reinsurer Hannover Re.
The economic agenda is a little fuller. On Monday and Wednesday, purchasing manager indices for industry and the service sector are available from the euro zone, UK and US on the slip. However, the US government’s monthly employment report on Friday, which traditionally receives even more attention monetary policy heavily influenced by the US Federal Reserve. The Fed has used the solid labor market as an argument against a deep recession and wants to get the high inflation under control by raising interest rates sharply. However, higher interest rates make equities less attractive compared to bonds.
The labor market report for the private sector by the service provider ADP and the weekly initial jobless claims will be published on Wednesday and Thursday. They are considered indicators for the official labor market report, although their informative value has varied in the past./gl/la/he
— By Gerold Löhle, dpa-AFX —