Market Report: The descent continues

Market Report: The descent continues
Written by insideindyhomes

market report

Status: 06/23/2022 12:39 p.m

Weak economic data and the activation of the second stage of the gas emergency plan are dampening investor sentiment: the DAX is falling. But an important chart technical mark still seems to be holding.

At lunchtime, the DAX fell by one percent to just over 13,000 points. He marked the lowest point of the day at 12,938 points – and thus below the mark of 13,000 points, which many chart-technically arguing experts consider significant. If the DAX sinks below it permanently, further price losses should be likely, according to the expert thesis.

Yesterday, the leading German index had already lost 1.1 percent to 13,144 points. “The situation on the international capital markets remains fragile,” write Commerzbank’s experts in their daily comment.

Fear of new lows

The issues of recession and inflation in all possible facets have been dominating the actions of market players for weeks now. Investors should definitely be prepared for further setbacks, says Carsten Klude, chief economist at MMWarburg: “Despite the already high price losses on the stock markets, we still advise caution at the moment. The DAX is likely to tackle its low for the year at 12,400 points again in the foreseeable future take.”

Economic data are disappointing

Current economic data from Germany are increasing investors’ concerns: The purchasing managers’ index for the private sector – industry and service providers together – fell to a six-month low in June, as S&P Global announced.

The data showed “that the German economy has lost virtually all of the momentum it gained from the easing of corona restrictions,” said S&P Global economist Phil Smith. The purchasing managers’ index for the entire economy in the euro zone even fell to its lowest level in 16 months.

“On the Edge of a Knife”

The fact that Federal Minister of Economics Robert Habeck has declared the gas emergency plan to be on alert also contributes to the uncertainty. Of course, the economy is already on a knife edge, says Sebastian Dullien, director of the IMK Institute. “We are expecting economic growth of 1.9 percent this year – but assuming that the flow of gas will not be interrupted. If it does, then we will find ourselves in a recession relatively quickly.”

Recession worries are also weighing on oil prices

Oil prices fell again today and are near their lowest levels in just over a month – which could at least be supportive for the stock markets.

Prices are being weighed down by fears of a global recession, which would have a negative impact on demand. The background is the consequences of the Ukraine war and high inflation. “There is a widespread understanding that a recession may be inevitable if central banks are to try to get inflation under control again,” said Craig Erlam, a researcher at broker OANDA.

Mine and steel values ​​weak

The rampant fear of recession has consequences for cyclical stocks such as mining and steel stocks. The Stoxx Europe 600 Basic Resources industry index fell by 2.5 percent to another low since the end of 2021. In Germany, Thyssenkrupp and Aurubis are losing more than the overall market.

Crisis bank Monte dei Paschi plans capital increase

The nationalized Italian crisis bank Monte dei Paschi di Siena (MPS) is planning a capital increase of around 2.5 billion euros to finance a new strategy. With this, the net profit should be tripled in the next three years, the bank announced. As part of the new business plan, MPS aims to reduce the cost portion of revenue from 71 percent last year to 60 percent in 2024. The plan is to close eleven percent of the branches and the voluntary departure of around 4,000 employees.

Musk: Tesla factories in Grünheide and Texas are losing billions

According to CEO Elon Musk, the new Tesla factories in Grünheide and Texas are currently losing billions. The reason is a lack of batteries and supply chain problems due to the situation in the Chinese ports. In Texas, only a tiny number of cars are currently rolling off the assembly line.

EU: Fewer commercial vehicles allowed

Demand for commercial vehicles in the EU continues to weaken. In May, with 136,410 copies, almost 18 percent fewer commercial vehicles were registered than in the same month last year, according to the industry association Acea. Since the beginning of the year, the decrease has amounted to almost a fifth to 673,095 vehicles. At least the demand for heavy trucks and buses is now recovering. The overall decline was due to a slump in registrations of light commercial vehicles up to 3.5 tons, which account for the majority of registrations.

Microsoft: Ukraine’s allies targeted by Russian hackers

According to Microsoft, Russian hackers are attacking Ukraine’s western allies on a large scale. The software group warned that they were particularly targeting government computers in NATO countries. Target number one is the United States, but overall Microsoft’s experts have identified attacks by Russian hackers on 128 organizations in 42 countries outside of Ukraine.

Shortage of parts: VW cuts working hours and wages in Brazil

Volkswagen is reducing working hours and wages at its plant in Brazil due to supply bottlenecks. The union has agreed to the German automaker’s proposal to cut working hours by 24 percent and wages by 12 percent from July to prevent closures, union representative Wellington Damasceno said. The agreement will come into effect indefinitely from July 7, when workers are expected to return from a 10-day shutdown. The measure will be reviewed monthly and the end depends on the normalization of the supply of auto parts.

Netflix coming with ads soon

Shares in streaming provider Netflix rose in US trading yesterday. Retailers attribute this to a report in the “Wall Street Journal” that Comcast, NBCUniversal or Google could become Netflix partners with a new, advertising-supported subscription option at a reduced price. Netflix announced a loss of 200,000 subscribers for the first quarter. The group had predicted 2.5 million new customers.

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