The potential for escalation in the Middle East continues to weigh on the stock markets. Irrespective of this, there are a number of factors pointing to a recovery, such as valuation and technical indicators.
30 October 2023. FRANKFURT (Börse Frankfurt). It still doesn't look like things will calm down in the Middle East. "The advances of Israeli ground troops into the Gaza Strip could lead to instability in the crisis region. For this reason, investors continue to stay away from what is happening on the global stock markets," explains Christian Henke from IG. Claudia Windt of Helaba agrees: "Despite some tailwind from the ECB's decision to keep interest rates constant, equity markets are under the spell of further developments in the Middle East." The potential for escalation should also not be underestimated, he said, given the strained relations between the world's power centers.
The DAX stands at x points on Monday morning after falling to 14,687 points on Friday. S&P 500 and Dow Jones had also gone out of trading on Friday with losses. Only the Nasdaq gained slightly. The rise in the price of gold is striking: For the first time since May, the fine ounce briefly cost more than 2,000 U.S. dollars again, currently it is 1,993 U.S. dollars.
"DAX fairly valued at 17,500 points".
According to Helaba's model calculations, the DAX would currently be fairly valued at around 17,500 points. "With this kind of potential, we think it only plays a minor role whether the race to catch up starts this year - keyword year-end rally - or not until next year," notes Windt's colleague Markus Reinwand. The recent second rise in the expectations component of the ifo index is an initial indication that economic sentiment has now bottomed out, he says. "Experience shows that such turnaround situations are particularly favorable for equities."
Reinwand
"When geopolitics fades into the background, we can look more hopefully to the end of the year," says Daniel Schär, Head of Portfolio Management at Weber Bank. The seasonal effect, the positive outlook for the year from companies and the current wait-and-see attitude of many investors have a positive effect. The bank is also confident for 2024 and forecasts an increase of 11 percent for the MSCI World index. "Especially non-cyclical sectors such as technology, healthcare and financials have a strong outlook." For cyclically sensitive sectors such as energy and industrials, on the other hand, expectations are rather low, he said.
Indicators with buy signals
"The general conditions are actually excellent," notes technical analyst Christoph Geyer. The seasonal statistics clearly speak for a positive phase until the end of the year. In addition, the indicators are in the oversold area and some have already generated buy signals. Most recently, a classic hammer had been formed, which was even confirmed the next day in accordance with regulations. "However, all the positive signals are currently being consistently ignored by market participants - because of the ongoing geopolitical problems," explains Geyer. As an easing is not yet in sight, the latent support zone in the area of 14,500 points will remain the orientation parameter this week.
Geyer
Numerous economic data are due this week. In addition, the reporting season is in full swing. In Germany, for example, BASF, Fresenius and Fresenius Medical Care, Lufthansa, Vonovia and BMW open their books, in the U.S. Apple, Pfizer and AMD.
Important economic and business dates of the week
Monday, October 30
10:00. Germany: Third quarter GDP. According to DekaBank, there was a further contraction of around 0.4 percent quarter-on-quarter. Sharp declines in industrial production, exports, imports and retail sales indicated this.
2:00 p.m. Germany: Consumer prices October. According to Helaba, the inflation rate probably fell, as price levels had been particularly high in the previous year. Declining price pressures at producers also pointed to a continued disinflationary trend. The bank expects the annual inflation rate to be 4.1 percent.
Tuesday, October 31
11:00 a.m. Eurozone: Third Quarter GDP. The market expects a small decline of 0.1 percent from the previous month, compared with the previous year, this would result in a small increase of 0.2 percent.
11:00. Eurozone: Consumer Prices October. The inflation rate is likely to have fallen noticeably from 4.3 percent in September to 3 percent in October, says Commerzbank. The core inflation rate has also probably softened somewhat.
Wednesday, November 1
3:00 pm. USA: Manufacturing Purchasing Managers' Index October. According to Helaba, the solid picture in the U.S. is unlikely to change significantly, although the figures are likely to be weaker than in the previous month.
19:00. U.S.: Federal Reserve interest rate decision. The market expects the key rate interval to remain unchanged for the second time in a row.
Thursday, November 2
1:00 p.m. United Kingdom: Bank of England interest rate decision. The Bank of England is also not expected to change the key interest rates, as expected by the market.
Friday, November 3.
1:30 p.m.. USA: October labor market figures. Commerzbank expects that 230,000 new jobs were created in October, which would be about the average of the last six months. It said September's 336,000 was an outlier on the upside.
3:00 PM. USA: Purchasing Managers' Index Services October.
by: Anna-Maria Borse, 30 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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