Stock market letters

“The record mood on the stock markets has now evaporated,” wrote analyst Claudia Windt from Landesbank Hessen-Thüringen. The conflict in the Middle East is driving increasing risk aversion on the financial markets. The most visible sign was the recent price losses on the stock market, although these were limited.

“Investors probably took advantage of the recent record highs to cash in, especially in this country,” Windt continued. Ultimately – unlike in the USA – the economic challenges for Germany have not diminished, despite positive news about inflation. This included the latest bad news from the automotive industry. The European Union can now impose additional tariffs on electric cars from China despite Germany’s “no”.

In this respect, the data on German new orders on Monday and industrial production on Tuesday should be followed particularly closely. According to Windt, the information should show whether the bottom was reached in August. At least the recent increase in orders gives hope for an improvement. In contrast, recent sentiment indicators such as the Ifo business climate have not yet signaled an imminent trend reversal.

However, investors should also keep an eye on the situation in the Middle East. Recently, statements by the US President caused uncertainty. Joe Biden, when asked by reporters whether he would support an Israeli attack on Iran’s oil facilities, said it was currently being discussed. Monday, October 7th, marks the anniversary of the attack on Israel by the terrorist organization Hamas, which triggered the Gaza War. Meanwhile, Israel has turned its focus to southern Lebanon to combat the Iranian-backed Hezbollah militia.

If tensions in the region worsen, oil prices could rise significantly due to concerns about a shortage of the raw material, which is important for the global economy. This would hit those sectors of the economy that rely heavily on oil hard. On the other hand, German companies with a strong export focus have to fear that their global business prospects will deteriorate.

“The latest developments in the Middle East show how uncertain the world is at the moment,” said Robert Greil, chief strategist at private bank Merck Finck. Despite all the risks, the expert also points out that further interest rate cuts by the central banks as inflation falls will support the financial markets: “If growth slows further in view of rising oil prices, it is not just the Fed that is likely to lower its key interest rates even more aggressively, which should cushion the market effects .” Lower interest rates make loans and investments cheaper and can thus support the economy.

The latest data from the US labor market was strong, which suggests that the US Federal Reserve is taking a less aggressive approach. The Fed will also take consumer prices for September into account when making its monetary policy decisions on Thursday. Recently, the inflation rate in the USA has approached the Fed’s target of two percent. In addition, the seasonal influence could mean further tailwind for the DAX, added David Bienbeck, board member at independent asset manager Albrech & Cie.

There is little news from companies on the agenda in Germany in the new week. On Thursday, the sugar company Südzucker and the pharmaceutical packaging manufacturer Gerresheimer will present business figures for the second quarter. The latter had recently set smaller goals due to the surprisingly slow market recovery and a production stop as a result of a hurricane. The reporting season for the major US banks starts on Friday, which could have a corresponding impact on the shares of German financial institutions./la/jsl/he