DAX in climbing: good mood in the bag

A whole host of good news is buoying the stock market. In addition to the decline in domestic inflation data, there is also a tailwind from New York. There will be trading again for the first time in the new year.

In the afternoon, the DAX followed the gains it made the day before and the morning, peaking at 14,293 points. The main barometer of the German stock market is currently slightly below and still gaining around 1.2%. The other indices also rose. The MDAX, the index for mid-sized stocks, is in even better shape than the parent index with a gain of more than two percent.

Inflation in retreat

The recovery is supported by the easing of investors’ fears of a recession. Particularly decline in domestic inflation data ensure a good mood on the trading floor. They raise hopes that the expected recession in the new year will be milder than feared.

The price level increased by 8.6% in December compared to the same month last year, the Federal Statistical Office announced today on the basis of preliminary data. The inflation rate was 10.0% in November and 10.4% in October. Despite this significant easing at the end of the year, German inflation for 2022 as a whole was higher than ever. Consumer prices increased by an average of 7.9%. There has never been a greater advantage in reunified Germany.

Experts welcomed the decline, but at the same time warned against over-optimism. “Beyond energy, price increases are likely to remain consistently high this year,” explained Jörg Kremer of Commerzbank.

“The wave of inflation seems to have peaked, although it should be borne in mind that the significant drop in December is due to special factors,” says Ulrich Wortberg of Landesbank Hessen-Thüringen (Helaba). Wortberg referred in particular to the gas price brake. “Hopefully, the coming months will bring more clarity here,” continued the expert.

Delivery chain problem defused

A positive development in terms of supply chain issues speaks even more for a “soft recession”. Claims by German industry for lack of materials fell for the third consecutive month in December, and significantly. 50.7 percent of companies still suffer from it, after 59.3 percent in November, as announced today by the Munich Ifo Institute in its survey. “It seems that a resolution of the bottlenecks in many sectors is now emerging,” said Ifo polling chief Klaus Wohlrabe. “This will support the economy in the coming months.”

Depending on how the corona situation in China develops, there may be setbacks again. The German economy receives more goods from the People’s Republic than from any other country.

Speaking of China: Concerns over the rapid spread of the corona virus in China caused mixed signals on Asian stock markets today. Japan’s Nikkei index closed unchanged at 26,095 points. However, the Shanghai Stock Exchange gained nearly 1%. According to the official index of purchasing managers, Chinese industry is still contracting, but less than feared.

Fewer unemployed than a year ago

The latest data on the German labor market is also encouraging. According to the Federal Employment Agency, the average annual number of unemployed was 2.418 million. They were 195,000 fewer than the previous year.

It has been an extremely difficult year with multiple burdens such as the pandemic, the war in Ukraine, inflation and the energy crisis, according to the head of the authority, Andrea Nahles. These have also left their mark, but in view of the many challenges, they have been moderated. “We have also seen here how the economy and the labor market are increasingly separating.”

Wall Street opens higher

The good news cycle is completed by the positive opening trend of the world’s leading New York Stock Exchange. The main Dow Jones index is up about 0.3% and the other major indices are also catching up. The market was closed yesterday for a public holiday.

On Wall Street in particular, the latest economic data from China is viewed positively. Interestingly, while sentiment in manufacturing purchasing managers (PMIs) continued to deteriorate in December, according to business magazine Caixin, the picture painted was less pessimistic than official reports over the weekend, the analyst wrote. market share broker Oanda Craig Erlam. SPI Managing Partner Stephen Innes also reported that the number of daily coronavirus infections in China’s populous centers had peaked.

Tesla shares are down sharply

Among individual shares, the focus is on electric car maker Tesla’s paper, which is down nearly five percent. Why the world’s largest electric car maker failed to meet analysts’ expectations in the fourth quarter, despite a record full-year deliveries. According to its own statements on Monday, the US company delivered 405,278 cars to its customers in the reporting period. According to Refinitiv data, however, experts had forecast an average of 431,117 vehicles. Tesla has been slowed by ongoing logistics problems and falling demand for vehicles on the back of rising interest rates and fears of a recession.

Analysts weren’t too enthusiastic. JPMorgan analyst Ryan Brinkman promptly lowered his price target for Tesla and reiterated his “underweight” rating. That deliveries were slightly better than expected was due to increased buying incentives, he wrote, and he suspected lower selling prices and weakened margins. Tesla, wrote Bernstein analyst Toni Sacconaghi, faces a significant demand problem that is likely to persist into 2023 and is still undervalued by many investors.

Euro with a clear slide

The prospect of lower inflation in Germany and the euro area is also affecting the foreign exchange market. The euro slipped a good 1% to $1.0530 in the morning but has currently recovered a bit to $1.0590. However, for Jochen Stanzl, market analyst at brokerage CMC Markets, the weakness is only a temporary setback. “There’s a good chance this year will be a month where the Fed stops raising rates, but the ECB does.” After all, the US Federal Reserve tightened the reins on monetary policy much earlier.

Oil prices have changed little

In the commodity market, traders resumed activity in Asia and Europe this morning. A barrel of North Sea Brent costs about 1.5% more, a barrel of US WTI light oil about 0.9%. After a weak start, prices have turned positive.

Brenntag as leader of the DAX

Shares of chemicals trader Brenntag are the highest value in the DAX with a six percent price increase. Investors are reacting positively to the news that the company doesn’t want to take over US rival Univar Solutions after all. Brenntag only confirmed in late November that it was interested in a takeover. The company has “decided not to continue these talks,” it said in a statement released last night. Shareholder Primestone Capital had publicly opposed the plans after they became known.

Lufthansa on the recovery of the sector

Lufthansa’s cards also increase, but they fail to maintain their maximum level of growth around two percent. Shares in European airlines such as Anglo-Spanish airline IAG and Air France-KLM also rose. Citigroup reiterated its buy recommendations for these three airlines. The resumption of air traffic on Asian and transatlantic routes strengthens the carriers’ tariff power, which should benefit the main European airlines in 2023.

Real estate stocks continued to recover

Real estate stocks have continued their price stabilization since late 2022. Vonovia is up nearly three percent in the DAX. In the real estate-heavy MDAX, sector equities are also gaining significantly in some cases. After the marked price weakness in the sector in recent years, investors could take advantage of the remarkably low prices to get started. Vonovia was the DAX’s biggest loser in 2022 with a drop of about half.

Fresenius praises, FMC loses

In the DAX, the focus is also on the shares of Fresenius and its subsidiary FMC, whose shares react differently to an analyst’s comment. A positive comment from the analyst gives Fresenius a boost. Jefferies investment bank experts have updated the stock to “buy” and raised the price target to 35 from 24 euros. Fresenius Medical Care (FMC) cards, on the other hand, lowered them to “Underperform” from “Hold” and reduced the target price to 22 from 29 euros. The share of the dialysis specialist thus drops by around one per cent.

MorphoSys shares under pressure

In the TecDAX, shares of biotech company MorphoSys lost about one percent against the trend after the loss was significantly higher in the morning. This comes after US bank JPMorgan downgraded shares of MorphoSys from “neutral” to “underweight” in a new year’s sector outlook. Analyst Richard Vosser points to significant cuts expected for the Monjuvi drug and the lack of a pipeline for 2023. He has put the newspapers under “negative catalyst control”, so he expects a negative event soon.