The Dax lost four percent last week. “The situation remains tense,” warns the DZ bank. “We may be in the ‘eye of the typhoon'”. Fresh economic data should provide orientation. But it is not only the virus that worries market traders.
According to experts, May will be anything but a happy month for investors this year. “The situation remains tense,” warns DZ Bank analyst Christian Kahler. “We may be in the ‘eye of the typhoon’ and the situation on the markets will worsen again.” It all depends on how the coronavirus pandemic is going and whether there is a second wave of infection.
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The fear of an increasing number of contagions and a protracted global recession broke the Dax down by around four percent in the old week. This is the biggest minus since the panic sales in mid-March. “There is a growing awareness that the recovery will only be gradual and that economic stimulus will only prevent the economy from completely collapsing,” said Roger Jones, chief financial officer at London & Capital.
Jean-Marie Mercadal, chief investor of the OFI asset manager, also warns of excessive expectations. “The recovery in most western economies will depend on whether consumer confidence comes back to boost demand. Only then will companies start investing again.”
“There is also still a risk of the trade dispute escalating with China,” warns market analyst Milan Cutkovic from brokerage firm AxiTrader. “Although the two superpowers recently came closer, US President Donald Trump remains unpredictable and could quickly change his strategy again.” In the dispute over China’s role in the virus crisis, Trump talked about breaking ties.
An overview of mood indicators
With the end of the reporting season, economic data come to the fore again. The start of the new week is on Tuesday ZEW index, which reflects the mood of the German stock exchange professionals. The following day the mood barometer follows European consumers. The indicators for will conclude on Friday Sentiment among German and European purchasing managers. “With the relaxation of restrictions, economic activities will increase again,” said Commerzbank analyst Christoph Weil. “The only question is at what pace the recovery is proceeding, and purchasing managers’ indices for May will hardly be able to answer this.”
Beyond the Atlantic, attention is focused on that Federal Reserve Bank of Philadelphia Economic Barometer and the Leading indicators on Thursday. Experts predict a slight improvement for both indices. Commerzbank expert Weil is expecting a value of 2.6 million for the recently received initial applications for US unemployment benefits – also on Thursday. “US unemployment has not yet peaked.” Most recently, the weekly number was 2.98. Since March 21, these applications have totaled around 36 million. However, the number of applications has been decreasing continuously for several weeks.
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