After a recent rather uneventful trading, there are several events on the stock markets this week that could cause stronger price swings. The focus is primarily on the central banks in the U.S. and the euro zone.
24 July 2023. FRANKFURT (Börse Frankfurt). The bare results to be presented by the central banks on Thursday should hardly come as a surprise. Helaba is not alone in thinking that it is a foregone conclusion that the Fed and the ECB will raise their key rates by 25 basis points each on Wednesday and Thursday respectively. However, the accompanying commentary is eagerly awaited.
"Leave all options open"
"Of greater relevance is what intentions the central banks signal for September and beyond," Deka says. Since future monetary policy is likely to depend heavily on the development of the data situation, the press conferences following the respective interest rate decision are assessed by the strategists as a "communicative challenge." The colleagues at Helaba consider it unlikely that one of the central banks will already announce the interest rate summit. Bankhaus Merck Finck also assumes that the ECB and the Fed will leave all options open for their next meetings in September.
Quarterly figures move into focus
At the start of this eagerly awaited week, the DAX is on the lookout. After mixed signals from the U.S., it is at 16,135 points on Monday morning, around 0.3 percent below the closing price of Friday afternoon at 16,177.22. The balance sheet season really picks up speed in this country in the coming days. Ten companies from the DAX alone will report this week on the course of the latest quarter. The U.S. is always a little earlier here, which is why about a sixth of the companies have already presented figures.
According to LBBW's calculations, 60 percent of the companies have topped expectations in terms of sales and as many as 73 percent have exceeded consensus estimates in terms of profits. However, the profit forecasts had previously also fallen by 5 percent during the past quarter. This lowered the bar, making it easier to jump over. The major banks, which are traditionally in focus at the start of the reporting season, presented "mixed figures at best", according to LBBW.
US Big Techs must deliver
The tech giants, which are highly weighted in the major indices, will probably have to offer more this week after their mostly brilliant price rally. "For the highly valued US stocks, an improvement in earnings prospects is urgently needed," says Helaba's research team. The DAX, on the other hand, has a certain buffer due to its valuation, which is by far the lowest in an international comparison.
In the opinion of the analysts, however, there is much to be said for continuing to back equities. However, price gains in the second half of the year are likely to lag behind those of the strong first six months. Martin Roth of Commerzbank is very confident. Thanks to the surprisingly robust state of the market, he said, the S&P 500 and Euro Stoxx 50 remain at key technical marks. "Setbacks are being bought, which suggests that the stock markets have further potential in the short term," analyzes the expert.
Here the pessimists, there the optimists
Uwe Streich of LBBW, on the other hand, is more skeptical, pointing to the normally weaker performance of the stock markets in phases of an inverse interest rate structure. So far, however, this has not been the case. In addition, equities have recently been completely decoupled from the development of the bond market, which is pricing in a recession. "This is unlikely to go well for too much longer," says the senior equity strategist. At least for a pause in the upward trend also speaks the Fear & Greed Index of CNN Business, which serves as a contra-indicator and has been in the area of "extreme greed" for some time.
Robert Halver of Baader Bank also therefore expects a "more volatile sideways movement" for German shares for the time being. According to his analysis, the support levels in the DAX are currently at 16,050, 15,942 and 15,750 points. If the upward movement continues, the resistances at 16,136, 16,140 and 16,210 would first have to be overcome. Above this, there would then be further barriers at 16,290 and 16,335 points. According to Marcel Mußler of Mußler Briefe, the chances that these hurdles will be overcome this year are good. According to his current index study, the previous high for the year at 16,427 points should be exceeded by "at least a few hundred points" in this scenario. In the best case, this could even happen this summer.
Rebalancing of the Nasdaq 100, change in the MDAX and SDAX
At the start of the week, the markets are eagerly awaiting the rebalancing of the Nasdaq 100, which comes into effect today. Due to a regulation of the US Securities and Exchange Commission (SEC), the index operator had to reduce the weight of the big tech companies in favor of the other index stocks. As a result, the share of the seven leading stocks (Apple, Microsoft, Nvidia, Alphabet, Amazon, Tesla and Meta) is likely to fall from around 56 percent at last count to around 44 percent.
In the DAX family, there are some changes in the index composition on Tuesday. Because Software AG's free-float factor has fallen below the 10 percent minimum required by Deutsche Börse, the company will be replaced in the MDAX by Vitesco Technologies. Its place in the SDAX will be taken by Borussia Dortmund. PNE will move up to the TecDAX.
Important economic and business dates of the week
Monday, 24 July
10.00. Euro zone: Purchasing managers' indices: While slight improvements are expected at a low level in the manufacturing sector (last 43.4 points), economists expect the service sector (last 52.0 points) to fall, bringing it closer to the 50-point mark.
Tuesday, 25 July
11.00. Germany: Ifo Business Climate Index: Here, the consensus expects the third decline in a row to 88.0 (from 88.5) points. Accordingly, both the data on the current situation and on business expectations are expected to come in somewhat weaker.
16.00. USA: Consumer confidence: Expected to rise from 109.7 to around 112 points.
Wednesday, 26 July
20.00. USA: Fed interest rate decision: The U.S. key interest rate is likely to be raised by a further 25 basis points to 5.50 percent. In the subsequent PK, the Fed could comment on whether it believes that the interest rate peak has thus already been reached.
Thursday, 27 July
14.15. Eurozone: ECB interest rate decision: Here, too, key interest rates are expected to rise by 25 basis points to 3.75 percent. The press conference with ECB President Christine Lagarde is eagerly awaited.
14.30. USA: Gross domestic product: According to analysts, the first estimate for the second quarter threatens a weakening of economic momentum. While the consensus expects GDP to reach 1.8 percent on an annual basis, the strategists at LBBW anticipate growth rates of only 0.8 percent.
Friday, 28 July
14.30. USA: Inflation data: Data on the private consumption deflator are expected to show a significant decline from 3.8 to around 3.1 percent. The core rate is expected to have fallen from 4.6 to 4.2 percent.
by: Thomas Koch, 24 July 2023, © Deutsche Börse AG
Thomas Koch is a CEFA investment analyst, investment specialist for structured products and certified certificate advisor. Since the beginning of 2006, he has been covering events on the capital markets as a freelance journalist.
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