The Middle East conflict continues to have a firm grip on the stock market. Since its high in July, the DAX has now lost 10 percent. Hardly anyone expects a quick recovery. The technical picture also looks anything but good.
23 October 2023. FRANKFURT (Börse Frankfurt). The number one topic on the trading floor remains the war between Israel and Hamas. "The threat of a ground offensive by Israel continues to scare investors," explains Christian Henke of IG. "No wonder stock markets around the world are in correction mode."
The DAX had exited trading on Friday at just 14,798 points - a seven-month low. On Monday morning, the index stood at 17,730 points. The U.S. stock markets also closed with significant losses on Friday. Gold, on the other hand, is in demand, with the price of a troy ounce currently at 1,970 U.S. dollars, not far from the 2,000 U.S. dollar mark. The price of oil has also risen further, with a barrel of North Sea Brent crude again costing 91 US dollars.
Impetus from reporting season?
"Geopolitical concerns dominate," says Thorsten Weinelt of Commerzbank. The reporting season is currently subordinate. However, the reporting season is now "in full swing". With Alphabet, Meta, Microsoft and Amazon reported this week four of the "Glorious 7". "This can mean momentum, basically higher volatility on disappointments or significant outperformance can be observed." However, he advises to keep an eye on the battered technical condition of the markets and the news from the Middle East. From the U.S. this week, Alphabet, General Electric, Amazon, Meta, Microsoft and Intel, among others, open their books; here in Germany, Deutsche Bank, Volkswagen and Mercedes.
Calm on the interest rate side
In addition, the ECB Governing Council meets on Thursday, this time in Athens. However, another interest rate hike is not expected. "The ECB is likely to keep a steady hand at the council meeting," says Ralf Umlauf of Helaba, for example. U.S. Federal Reserve President Powell has also indicated an interest rate pause for the monetary policy meeting in the coming week. Against this background, interest rate worries would not increase for the time being. "However, it is still premature to give the all-clear."
Technically badly battered
Technically, things do not look good. "At the end of last week, the DAX had to leave the underside of the overriding trading range at 14,800 to the supply side," Henke notes. If a rapid recapture of this mark fails, further losses threaten. "The traffic light should finally jump to red below the 38.2 percent retracement at 14,727 points."
"The end of the week makes us fear bad things," says Christoph Geyer. Until Thursday, there had still been hope that no new low would be generated. "This hope was abruptly shattered on Friday." The indicators had arrived in the oversold area, but had not yet generated any buy signals. "Such signals are also unlikely to have much impact at the moment," the independent analyst explained. The geopolitical situation unsettles the market participants too much.
Geyer
Important economic and business dates of the week
Tuesday, October 24
10:00. Eurozone: Purchasing Managers' Index October. According to Commerzbank, the purchasing managers' indices are likely to put a further damper on hopes of an economic recovery in the near future. This is because the two indices are unlikely to have improved and, with values well below 50, continue to warn of a recession.
Wednesday, October 25
10:00 a.m. Germany: ifo Business Climate October. According to DekaBank, companies will again assess their current economic situation as worse. However, business expectations could rise for the second time in a row. All in all, the ifo business climate is expected to improve for the first time after five consecutive declines.
Thursday, October 26
2:15 p.m. Euro zone: ECB interest rate decision. No rate hike is expected in the market.
2:30 p.m. USA: Third quarter GDP. In contrast to the euro zone, there are no signs of a downturn in the U.S. so far, as Commerzbank notes. In the third quarter, the economy expanded by an annualized 4.2 percent. Private consumption in particular has proved to be very robust. In the coming year, however, the massive interest rate increases would dampen the economy more strongly.
2:30 p.m. USA: New orders for durable goods September. DekaBank forecasts a 2.5 percent month-on-month and 5.8 percent year-on-year increase in new orders at Boeing.
Friday, Oct. 27
2:30 p.m. U.S.: September price index consumer spending excluding food and energy.
Saturday, October 28.
Seminar: Investing for women. The topic this time: "Wealth building on the stock market - with sustainable investments to financial independence (online)".
by: Anna-Maria Borse, 23 October 2023, © Deutsche Börse AG
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics.
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