WDH / WECHENAUSBLICK 2: Dax remains the game ball of the coronavirus crisis | 03/15/20

(A typo was removed at the end of the first paragraph.)

FRANKFURT (dpa-AFX) – After one of the darkest weeks in stock market history, everything on the stock market will continue to revolve around the corona virus. Borders are closed, airlines are cutting routes, cars are becoming warehouses, supply chains are at risk and public life is increasingly coming to a standstill: The coronavirus crisis has an economy and Financial markets firmly under control. Many countries want to reduce the impact of the pandemic with extensive help for companies. It is not clear whether this will help the Dax (DAX 30) get back on its feet after the corona crash. For the analyst Markus Reinwand from Landesbank Helaba, the current development is “a clear indication that the markets are currently exaggerating downwards”. It is difficult to say when this will end.

The crash since weekend 22./23. February, when the consequences of the rapid spread of coronavirus with the closure of parts of northern Italy were first clearly felt in Europe, has historical dimensions. The Dax lost around 20 percent in the past week alone – a higher weekly loss had only been seen in the global financial crisis in autumn 2008. In the past three weeks, the Dax has lost a third of its value. The Dax is now a good 50 percent away from the record high of 13 795 points that the leading German index had still marked in mid-February.

A little hope that at least the first bargain hunters could access the start of the week gives a look at the USA. There, the major indices such as Dow Jones, S&P 500 and Nasdaq 100 on Friday rose by around 10 percent each due to the prospect of massive financial support for the economy. So had US President Donald Trump declared a national emergency due to the spread of the coronavirus, which could release many billions of dollars to combat the new coronavirus Sars-CoV-2. In addition, the Democrats in the US House of Representatives agreed with the government on an aid package for families affected by the spread of the corona virus.

However, measures such as a cut in the key interest rate by the US Federal Reserve and extensive support from the European Central Bank for the economy in the stock market have recently been wasted. Thus, after-hours price gains melted away from Friday evening to early Saturday evening, according to the broker IG’s indication. Most recently, the Dax indication with 9600 points was still around four percent above the Xetra close on Friday.

Experts therefore believe that a short-term recovery of the stock markets is possible, but generally see more risks for further losses. According to the finance expert Andreas Büchler from Index Radar, the Dax is slowly approaching a favorable level, but it is doubtful whether investors want to make long-term investments again given the nervousness on the market. DZ Bank analyst Christian Kahler comes to a similar assessment. The foreseeable recession in the economy due to the coronavirus pandemic could initially cause the Dax to drop to 8000 points.

However, the DZ Bank analyst is also confident that “economic activities, private life and media interest will return to normal in the spring”. He expects the economy to pick up significantly in the second half of the year. The Dax could then recover to 11,500 points by the end of the year. For Ulrich Kater, Dekabank’s chief economist, the mood depends on the number of infected people. It is the yardstick for prices on the capital market – not the classic economic data.

In view of the current virus crisis, economic data should move into the background in the new week. The current surveys hardly reflect the exacerbation of the virus situation anyway. The focus of attention will be on the US Federal Reserve at midweek. Experts anticipate a further cut in key interest rates by 0.50 percentage points. But more money alone cannot fix the virus problem, warned analyst Michael Hewson from broker CMC Markets. Because: At the moment, it is not just a question of a demand crisis, but also the supply of goods and preliminary products for industry is sometimes scarce.

Investors are also keen to see how companies deal with the growing uncertainty. And on what basis they formulate their forecasts. A premium will be given on Monday by the insurance company Talanx, majority owner of Hannover Re. It has been known since February that the insurance group was able to record a record profit in 2019. It is still uncertain to what extent he will involve his shareholders.

On Thursday, Lufthansa will focus on details for its 2019 figures, especially details for 2020. The airline is feeling the full impact of travel bans, holiday cancellations and lower global trade. For example, after the entry stop for Europeans decreed by US President Trump, the important route across the North Atlantic almost completely disappears.

Lufthansa is now holding the money together and suspending the dividend, as the company announced late Friday evening. The group also takes out additional loans and, before the weekend, the shareholders are already preparing for a significant drop in profits in the current year

— By Jan Christoph Freybott and Michael Schilling, dpa-AFX —

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