Market report: New DAX record, old worries

News that talks between Democrats and Republicans on raising the debt limit have stalled weighed on Wall Street. The DAX had previously reached an all-time high.

The dispute over the US debt limit was the dominant topic on the international stock markets at the end of the week. After the DAX had previously reached an all-time high, the US indices remained weak. Shortly before the end of trading in Germany, there were media reports that negotiations between the parties had stalled.

Republican Rep. Garret Graves, tasked with chairing the talks, said after an hour-long session it was time for a break. Differences still exist between the Republicans in the House of Representatives and the Democratic government.

The Dow Jones gave up early gains and closed 0.3 percent lighter at 33,426.63 points. The market-wide S&P 500 lost 0.1 percent to 4191.98 points. The Nasdaq 100 technology index fell 0.2 percent to 13,803.49 points.

The DAX had previously passed the 16,300 point mark for the first time in its history and reached almost 16,332 points in the course of trading. He thus surpassed the old record of 16,290 points that he had set in November 2021. The leading German index was unable to maintain its high level after the news about the break in talks in the USA and closed with a premium of 0.7 percent to 16,275 points. In the trading week, the index gained around two percent.

Investors are now hoping for further price gains, but the setback towards the end of trading should give the optimists food for thought. The debt dispute is by no means off the table, even if it is unlikely that the parties will not come to an agreement. If the upward breakout does not turn out to be a flash in the pan, new highs are likely to result, predicts Christian Henke from broker IG. “The next milestone would then be the next round number at 17,000 points.” In September of last year, the DAX was still trading at around 12,000 points.

It was the hope of an agreement in the US debt dispute that investors used as an opportunity to buy. President Joe Biden and leading Congressman Kevin McCarthy recently reaffirmed their determination to reach a speedy agreement.

“It is and remains the hope of a big hit in the US debt dispute, which keeps investors in line,” says market analyst Timo Emden. The smoldering fears of inflation and recession are out of sight and thus out of the minds of market participants for a moment. According to Emden, the market players should no longer have any real worries about the negotiations failing. “But as long as a final breakthrough isn’t in the bag, doubts remain,” said Emden.

Despite the new historic high, there are also skeptical voices on the market: “This record is the most unpopular of all time,” wrote analyst Daniel Saurenz from Feingold Research. “Because many investors, especially professionals, missed the rally and are desperate to buy afterwards.” But that is absurd, because the stock market records are faced with an enormous headwind from rising interest rates and at best mediocre economic data.

For Pierre Veyret from the trading house Activtrades, the knot on the stock exchanges has not burst without a doubt. “Stubborn inflation, slowing recovery momentum in China, monetary tightening and weakness in US employment data and banking sector could still be seen as dark clouds for investors,” the market analyst warned.

A risk factor is not least that the global economy is recovering more slowly than hoped. Just a few days ago, surprisingly weak growth in Chinese industrial production and consumer spending had fueled concerns about the country’s economic recovery. China’s economy is of enormous importance for the global economy.

The economic situation in the eurozone also remains tense. According to Commerzbank, the economic recovery is on “shaky ground”. The experts refer to the significant interest rate hikes by the ECB since mid-2022. “With the usual delay, this will noticeably slow down domestic demand,” says an outlook. And current statements by ECB President Christine Lagarde point to further rate hikes: “We are heading for more difficult decisions in the future, but we will be courageous and make the decisions that are necessary to bring inflation back to two percent,” said Lagarde the Spanish television channel TVE.

Tensions between the US and China over Taiwan’s independence also pose a problem for the global economy. Western countries are also concerned about their dependence on China for supplies such as raw materials, pharmaceutical products and electronic chips. They are currently taking countermeasures, but it will take years to build up enough of their own capacities. Allianz’s chief economist, Ludovic Subran, sees the danger of a new phase of protectionism.

Whether the DAX can continue to soar next Monday also depends on Wall Street. Investors there are much more cautious. The Dow Jones fell 0.5 percent to 33,368 points. The broader S&P 500 and the Nasdaq tech index also declined.

Adidas wants to continue to sell parts of the inventory of the products of the “Yeezy” series, which were launched together with rapper Kanye West, even after the separation from the controversial musician. A “significant amount” will be donated to organizations working against discrimination and hate, including racism and anti-Semitism, Adidas announced. The sale of the first “Yeezy” products is scheduled to start in May. The expensive move away from the scandalous rapper and his “Yeezy” products already caused the sporting goods manufacturer to make a loss in the first quarter. The bottom line was a minus of 24 million euros.

The VW Group is withdrawing completely from Russia for the time being. The plant in Kaluga will be sold to the Avilon trading group, the Wolfsburg company announced. After earlier steps in connection with the Ukraine war, the decision de facto marks the end of an independent Russia business at Europe’s largest car group. According to media reports, Moscow gave the green light this week.

The Italian media group MFE-Mediaforeurope is stalking ProSiebenSat.1 for a stake of 30 percent. MFE, controlled by former Prime Minister Silvio Berlusconi and his family, said it had “rounded off” its stake and now directly holds 26.58 percent of the Bavarian television company. Including derivatives, MFE even comes to 28.87 percent. At the Annual General Meeting, where shares held by ProSiebenSat.1 itself have no voting rights, MFE could throw 29.7 percent into the balance.

According to insiders, the governor of MFE in Munich, Katharina Behrends, is to move into the ProSiebenSat.1 supervisory board in June. With a direct stake of more than 30 percent, a mandatory offer to the other shareholders would be due. Exceeding the 25 percent threshold, which MFE had only recently reported, called the Bavarian media regulator into action. She checks the Berlusconi Holding for the required distance from the state.

The private bank Berenberg left the rating for BioNTech on “buy” with a price target of 200 US dollars. The World Health Organization has to protect against the corona variant XBB1.5. an update of the vaccination protection with a monovalent vaccine is recommended, wrote analyst Zhiqiang Shu. This is positive for manufacturers of mRNA vaccines such as BioNTech.

The US company Apple has restricted the use of ChatGPT and other AI tools for its employees. As the “Wall Street Journal” reported, citing a document and insiders, Apple is concerned that employees could pass on confidential data during use. Apple is currently developing similar technology, the newspaper said.

Applied Materials exceeded market expectations with its sales forecast for the third quarter. The chip supplier is assuming 6.15 billion dollars (plus or minus 400 million dollars), as he announced yesterday after the US stock market closed. Analysts expect an average of $ 6.02 billion. On an adjusted basis, the company earned $2 a share compared to analysts’ forecast of $1.84 a share.