Interest rates will soon fall - the market is now convinced of this. The timing? Not so important. But some people think the euphoria is exaggerated, at least for now.
5 February 2024. FRANKFURT (Börse Frankfurt). The record mood on the stock markets continues. "Expectations of interest rate cuts remain strong, with market participants still betting on five rate cuts in the next twelve months," says Ulrich Wortberg from Helaba. The central banks are not sending any signals regarding a rapid easing course.
In the USA on Friday, interest rate cut fantasies and convincing figures from Meta and Amazon led to new highs for the Dow Jones, S&P 500 and Nasdaq 100. However, the subsequently published US labor market figures dampened the euphoria somewhat: the figures were very good - so concerns about the economy being too heavily burdened by high interest rates appear to be exaggerated. The DAX briefly exceeded its old all-time high on Friday and set a new one at almost 17,005 points. On Monday morning, the index stood at 16,913 points.
Potential "manageable"
According to Markus Reinwand from Helaba, however, the potential for equities in the coming months is manageable, especially for US stocks. "Incidentally, a consolidation phase would also fit the pattern of previous US election cycles," adds the analyst. While the full-year performance of the S&P 500 since 1928 has hardly differed from the long-term average in presidential election years, the pattern is visibly different: the first half of the year was rather weak on average, with equities only really taking off in the second half of the year. "However, it is questionable whether this pattern can be relied upon in view of the uncertainties associated with this election in particular," he concedes.
China speaks for German equities
Robert Halver from Baader Bank also refers to the situation in China. There, the planned stabilization of sentiment is being thwarted by a renewed flare-up of the Chinese real estate crisis - the threat of Evergrande's liquidation. However, he assumes that Beijing will intervene: "Further support measures from Beijing to brighten up the economy and financial markets are to be expected." This would also give export-sensitive German shares upside potential. After all, DAX companies generate around 80 percent of their sales abroad on average. Historically significant average valuation discounts compared to US shares according to the price/earnings ratio lend German shares additional potential.
Halver
Short breather, then new highs
From a technical point of view, Christoph Geyer believes that the upward breakout is now likely to be followed by a breather. This is because the indicators have generated sell signals and the seasonality only points to a further rise from the end of March. However, it remains the case that new record highs are only a matter of time. "If it doesn't happen in the short term, then it will happen at the end of March."
The peak of the reporting season has passed in the USA, but many quarterly reports are due this week in Europe. Among others, Infineon, Siemens, Siemens Energy and Qiagen are opening their books.
Important economic and business events of the week
Tuesday, February 6
8.00 am. Germany: New orders December. The figures for German industry are likely to show a continuing downward trend, says Commerzbank. Incoming orders are likely to have stopped falling only because of slightly more large orders.
Wednesday, February 7
8.00 am. Germany: Industrial production December. Production fell again in December, says DekaBank. This is the seventh decline in a row. There has never been such a long phase of shrinking production in the history of Germany as a whole.
Thursday, February 8
2.30. China: January consumer prices. Analysts expect deflation to worsen from minus 0.3 to minus 0.5 percent, according to Deutsche Bank. This could fuel concerns of a deflationary spiral.
Friday, February 9
China, South Korea: Stock exchanges remain closed for the holiday.
By Anna-Maria Borse, 5 February 2024, © Deutsche Börse AG
Anna-Maria Borse is a financial and business editor specializing in the financial market/stock exchange and economic topics.
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