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Market Report: Investors are becoming bolder

Market Report: Investors are becoming bolder
Written by insideindyhomes


market report

Status: 02.06.2022 6:16 p.m

Investors were inspired today by the prospect of a reassurance in energy prices. Because the oil cartel OPEC+ wants to expand production in the summer. The DAX then rose.

Trading today was dominated by the latest moves in the oil markets. A decision to increase production by the OPEC+ oil cartel, which had already been speculated about in advance, boosted the market.

At the end of a friendly trading day, the DAX rose by 1.01 percent to 14,485 points. It closed near its daily high of 14,492 points. Rising energy prices are considered to be the main driver of the recently high inflation rates and as a brake on the economy, which is why the relaxation on the stock market was very welcome.

However, the largest European market in London was closed today due to the celebrations for the 70th anniversary of the throne of the British kings. British investors will also be absent tomorrow, so sales will be lower.

OPEC+ expands production volume

The background to today’s interim high on the stock market was speculation about an increase in production and Russia’s future role in the OPEC+ oil cartel. Before a regular meeting of the oil production association, Saudi Arabia had apparently pledged to increase oil production if Russian production falls significantly due to Western sanctions, the Financial Times (FT) reported.

As became known in the afternoon after an online meeting, the cartel will significantly expand its production volume in the summer. Instead of the additional 430,000 barrels (159 liters each) that are to be pumped into the market in June, daily production in July and August is to increase by around 650,000 barrels each. According to the statement, despite the announced EU embargo on Russian oil, Russia continues to participate in the production agreements. Recently there has been speculation as to whether Russia will have to leave the oil cartel.

According to the Comdirect market expert Andreas Lipkow, such a measure can help to reduce inflation dynamics and reduce the cost pressure on companies.

With volatile trading, oil prices made up for larger losses over the course of the year and have now turned positive again.

Interest rate discussion continues

On the other hand, the mood on the domestic stock market was dampened somewhat by statements by the private banking association BdB, according to which people in Germany will have to adjust to higher inflation rates in the long term. The BdB is therefore calling for the ECB to speed up the turnaround in interest rates.

“The high inflation burdens consumers and unsettles the economy. Inflation expectations are also rising significantly. A negative key interest rate has long since ceased to fit in with this situation,” said BdB General Manager Christian Ossig.

On the market, a first interest rate hike by the ECB in July after years of zero interest rate policy is considered a foregone conclusion. In view of inflation rates of around eight percent in the euro zone, this should not be more than a first step.

US job market with mixed message

In the USA, too, the discussion is being vigorously conducted in view of the recently stronger economic data. Yesterday, the purchasing managers’ index for US manufacturing surprisingly rose. This reduces the likelihood that the Fed will take a break from raising interest rates in the fall, says investment strategist Michael Hewson of brokerage house CMC Markets.

Meanwhile, initial jobless claims have also fallen over the past week. The number had fallen by 11,000 to 200,000, the US Department of Labor said in Washington in the afternoon. It is the second decline in a row. Analysts had expected an average of 210,000 applications. The level of aid applications has been at a low level for several months, which indicates a robust US job market. The weekly initial claims are considered a short-term indicator for the development of the US labor market.

In contrast, the private sector in the USA created significantly fewer jobs than expected in May, as reported by the employment service provider ADP, so that the overall message from the job market was mixed. Industrial orders were also mixed. The US government will release the official May jobs report this Friday.

More US rate hikes on the horizon

The deputy chairman of the US Federal Reserve, Lael Brainard, has announced further interest rate hikes for the upcoming interest rate meetings, also for September. It’s reasonable for financial markets to expect interest rates to rise by 0.50 percentage points in June and July, Brainard said in an interview with CNBC today.

It was “very difficult to see an argument for a break” in September. In the absence of a slowdown in inflationary pressures, it may well be appropriate to then raise interest rates again by 0.50 percentage points. A smaller interest rate step is also conceivable. The Fed’s main goal is to fight inflation.

The Fed will do whatever is necessary. “It’s very hard to predict exactly when inflation will come down, but the Fed’s tools are starting to have the desired effect,” Brainard said.

Wall Street is turning positive

The New York Stock Exchange has turned positive after a changeable course of trading. The Nasdaq technology exchange in particular is up around 1.2 percent. This despite a forecast cut by the software giant Microsoft, which is struggling with the strong dollar. The leading index, the Dow Jones, is growing at a below-average rate of just 0.3 percent.

The solid weekly data from the jobs market is viewed with mixed feelings. Because the stronger the labor market develops in the USA, the greater the scope for interest rate increases for the US Federal Reserve – with all the negative consequences for the stock market.

Microsoft lowers the forecast

A forecast warning from heavyweight Microsoft is negative for the overall market. Because unfavorable exchange rates make the software group more cautious for the fourth quarter.

Due to additional burdens from currency effects of almost half a billion US dollars, the group now calculates sales of 51.94 to 52.74 billion dollars (up to 49.3 billion euros) in the last quarter of the current fiscal year. So far, 52.40 to 53.2 billion dollars had been announced. The surplus is now expected to reach $16.85 billion to $17.43 billion, after a best estimate of $17.1 billion to $17.67 billion previously. Microsoft give around 1.5 percent on the Nasdaq.

Euro is catching up

On the foreign exchange market, the euro is recovering and is trading at $1.0734 again well above $1.07. In the morning, the common currency was almost a cent lower. The European Central Bank set the reference rate at 1.0692 (Wednesday: 1.0712) dollars.

The oil speculation and the resulting higher risk appetite of investors is strengthening the euro, at least for now. Most recently, however, the greenback had benefited from the ever-increasing interest rate advance in the USA.

FMC stands out negatively

At the end of the DAX, Fresenius Medical Care (FMC) had a negative impact, falling 3.5 percent against the trend. The share is thus continuing the negative trend that began in April. The paper of the parent company Fresenius also fell by 1.4 percent.

On the other hand, the sports outfitters Adidas and Puma were in demand. The papers of the Adidas group, which had been traded as a potential candidate for relegation from the Stoxx Europe 50, will remain in the leading index for the time being. In addition, consumer stocks were in demand across Europe today. The daily winner in the DAX was Sartorius, which grew by more than 5 percent.

RWE buys Dutch gas power plant from Vattenfall

The energy group RWE wants to take over a gas-fired power plant from Vattenfall in the Netherlands and thus expand its hydrogen business. RWE announced that it would acquire the “Magnum” gas-fired power plant in Eemshaven, Netherlands, for a price equivalent to the company’s value of EUR 500 million. The plant, which has been in operation since 2013, has a capacity of 1.4 gigawatts. It can be technically converted so that it can be operated with up to 30 percent hydrogen. In addition, there is the possibility of converting the gas-fired power plant completely to hydrogen by the end of the decade.

Rheinmetall boss expects strong growth

Rheinmetall is preparing for a significant boost in sales due to the increasing demand for armaments in the wake of the Ukraine war. “A growth rate of 20 percent should be possible over the coming years,” Armin Papperger, head of the armaments group and automotive supplier, told the “Handelsblatt”. He added that sales of defense products should increase to over ten billion euros. This would be more than a doubling.

The dismissal of the coach is expensive for BVB

The separation from coach Marco Rose is driving Bundesliga club Borussia Dortmund even deeper into the red. Borussia Dortmund GmbH & Co. KGaA announced in the afternoon that it was expecting a deficit in the group of between 25 million and 29 million euros in the current 2021/22 financial year. The background is essentially the premature separation from the previous head coach and his team.

According to the announcement, BVB and the coaching team agreed today on the financial content of the early termination of the employment contracts, which originally ran until the end of June 2024. This leads to a special write-off in the mid-single-digit million range. At the end of February, after leaving the Europa League competition, the club had to correct its forecast downwards. Until then, a deficit of up to 17 million euros had been expected, but since then a minus of up to 24 million euros has been expected.

Cognac Thirst Boosts Remy-Cointreau Profit

Strong demand for premium cognac in the US and China, coupled with austerity measures, boosted profits at French liquor group Remy Cointreau. In the 2021/22 financial year, which ended at the end of March, organic operating profit rose by almost 40 percent to 334.4 million euros, the manufacturer of Remy Martin cognac and Metaxa brandy announced. The shareholders want to pay a dividend of 1.85 euros per share plus an extraordinary dividend of one euro.

Oracle can take over software specialist Cerner

SAP rival Oracle can tick off the biggest takeover in its history. The company announced that all of the antitrust approvals required for the purchase of the health software specialist Cerner had been granted. Oracle expects the transaction to be formally completed next Monday. The group announced the purchase of Cerner in the last few days of last year. The price is a total of 28.3 billion US dollars.

Ford is investing $3.7 billion

Ford is accelerating the transition to electromobility, following the goals of US President Joe Biden. The second-largest US automaker announced on Thursday that it would invest a total of $3.7 billion in its assembly plants in Michigan, Ohio and Missouri for the production of electric cars and gasoline vehicles. At 2.3 billion dollars, the majority of this is attributable to electric vehicles.

The sum is part of the announced expenditure of 50 billion dollars by 2026, with which Ford wants to catch up with the electric car manufacturer Tesla. The US government has given automakers a target of making half of all new cars on the market electric or plug-in by the end of the decade. In return, millions in state aid will flow. Investors welcome the step, Ford papers are increasing on the New York Stock Exchange.

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