Are the stock market and the economy completely diverging? Not at all, according to some. In any case, many are now also expecting a "breath of spring" for Europe's economy.
19. Febuary 2024. FRANKFURT (Börse Frankfurt). Miserable economic data, great dissatisfaction, war in Ukraine and the Middle East - the record mood on the stock market is hard to understand for many in view of the difficult news situation in this country. Markus Reinwand from Helaba has investigated the question of how the stock market boom and the numerous bad news stories fit together. He compared the DAX valuation with leading indicators for global economic development.
His conclusion: the DAX is currently fairly valued and the valuation expansion of recent months is entirely justified in view of the brighter global growth prospects. In addition, there is further potential for the DAX if the global economy gains momentum - through the combination of rising corporate profits and a higher valuation. "So equities are by no means out of touch with reality," he says. "Perhaps the mood is currently too strongly characterized by alarmism."
No tailwind from Wall Street
The DAX climbed to a new all-time high of 17,198 points on Friday, but the index ended trading slightly lower at 17,117 points. On Wall Street, it was not quite enough to reach new highs on Friday. The reason: US producer prices rose more sharply than expected in January. The previous Tuesday, US consumer prices had already indicated persistently high price pressure. This dampened hopes of rapid interest rate cuts. There will be no stimulus from the USA today, Monday: It is Presidents` Day, the stock exchanges will remain closed. On Monday morning, the DAX stands at 17,067 points.
Bottom reached?
According to Thorsten Weinelt from Commerzbank, the coming days will probably revolve around the European leading indicators, specifically the purchasing managers' indices and the ifo business climate. "In Europe, the hope is that the bottom could be reached soon." The US economy has already proved to be significantly more robust than forecast in the last two quarters, and recession expectations have fallen. He expects improvements in the local purchasing managers' indices and the ifo business climate. The buying mood on the stock markets is therefore likely to remain. "It will also be interesting to see how China starts trading after a week-long break."
Chart technology: "Hardly any further upward momentum in the short term"
From a technical perspective, the signs point to consolidation. The DAX did manage a dynamic breakout above the resistance zone, as Christoph Geyer notes. However, this momentum was initially nipped in the bud on Friday with a doji. "The doji, where the opening and closing prices are almost at the same level, always signals uncertainty among market participants," explains the chart technician. The start of the week could therefore begin with a corrective movement. This is also in line with the seasonal situation, which does not suggest a sustained rise until the end of March. "Further dynamic upward movements are therefore unlikely in the short term."
Important economic and business events of the week
Monday, February 19
USA: Presidents' Day. The markets remain closed.
Wednesday, February 21
20.00. USA: Minutes of the US Federal Reserve meeting on January 30/31. DekaBank does not expect any major news following the comments made by various central bankers after the meeting. However, there may be some interesting information on the subject of balance sheet reduction.
Thursday, February 22
10.00 am. Eurozone: Purchasing Managers' Index February. The sentiment indicators could give a hint of spring, says Commerzbank. The expected further rise in the Purchasing Managers' Index for industry would raise hopes that the industrial sector will soon bottom out. The index for the services sector also rose slightly again in February, but at 49 points will probably remain in recession territory.
11.00 am. Eurozone: Consumer prices January, final figures. According to the flash estimate, inflation in the eurozone fell less sharply than expected in January, explains DekaBank. In the service sector in particular, it remained high at 4 percent. The more detailed final data would now provide more information on how sustained the upward price trend in this sector actually is.
1.30 pm. Eurozone: Summary of the ECB meeting on January 25.
Friday, February 23
10.00 am. Germany: ifo Business Climate February. According to DekaBank, the mood among German companies could have fallen for the third time in a row, albeit only slightly. The poor state of the economy will once again be reflected in a slight decline in the assessment of the situation, while hopes for improvement are growing.
By: Anna-Maria Borse, 19. Febuary 2024, © Deutsche Börse AG
Anna-Maria Borse is a financial and business editor specializing in the financial market/stock exchange and economic topics.
Feedback and questions to redaktion@deutsche-boerse.com
Borse