The crisis in the Middle East is weighing on the stock markets. Added to this are the high interest rates. However, the company reports for the third quarter could be a ray of hope.
16 October 2023. FRANKFURT (Börse Frankfurt). After the price losses on Friday, things do not look much better at the start of the new trading week.
"The situation in the Middle East seems to be escalating. A ground offensive by Israel is becoming increasingly likely," notes Christian Henke of IG. He says there is now a threat of a lasting crisis, especially since Iran could get involved. "The next stage of escalation could shake the financial markets and throw a spanner in the works of a hoped-for fall rally." Another weighing factor is the recent sharp rise in oil prices. A barrel of North Sea Brent crude now costs over 90 U.S. dollars again.
The stock markets had already lost ground on Friday. Caution was again the order of the day, and "safe havens" such as gold, the US dollar and government bonds were in demand. The DAX closed the week at 15,187 points. The U.S. markets also recorded losses. On Monday morning, the DAX is slightly down at 15,150 points.
Henke
"Surprisingly robust corporate earnings"
It is true that the DAX regularly experiences strong seasonal tailwinds in the fourth quarter, as Andreas Hürkamp of Commerzbank notes. "This year, however, the restrictive monetary environment with high money market yields is likely to slow down the stock markets." As long as corporate earnings continue to be surprisingly robust, however, sharp price declines are unlikely, he said.
Chance of a year-end rally
For the reporting season that has just begun, Weber Bank continues to expect high profits from European and U.S. companies. "Consumer demand and profit margins have been stable in recent months," notes Marthel Edouard. This will also provide support for stock prices in the coming weeks, he adds. The bank therefore advises staying invested in the stock market. "The chances of a year-end rally are good."
It considers shares of food producers, supermarket chains and cosmetics manufacturers in particular to be promising - due to their crisis-proof business models and stable profit developments in economically difficult times. From an earnings perspective, financials and energy stocks are also interesting, she said. "In the case of technology stocks, after the price rally of the last few months, you should expect short-term price setbacks every now and then," Edouard adds. In the medium term, however, there is further upside potential.
Chart picture cautions
In addition to the geopolitical developments, the technical situation also weighs heavily, as Ralf Umlauf of Helaba explains. "The DMI is still on sale, and Stochastic and MCAD are no longer directed north, but are still above the signal lines." An important resistance zone is found from 15,550 to 15,650 points. This is where the 38.2 percent retracement and the 200-day line lie, he said. "Above mentioned low is currently the relevant support, below which room to 14,809 points would be created."
This week, the third quarter reporting season continues. In the U.S., for example, Bank of America, Goldman Sachs, Morgan Stanley and Tesla open their books, in Europe SAP and Nokia.
Important economic and business dates of the week
Tuesday, 17 October
11:00 A.M. ZEW Economic Sentiment Indicators October. According to Deutsche Bank, the latest sentiment indicators point to a weakening of the German economy. This trend may have continued - at a low level - in October.
2:30 P.M. USA: Retail sales September. According to DekaBank, retail sales may have been very weak. Because after three and a half years, a government support for students had expired, specifically the suspension of interest payments on student loans.
Wednesday, 18 October
4:00 A.M. China: third quarter GDP. Growth momentum should have slowed to 4.5 percent after 6.3 percent in the second quarter, mainly as a result of still subdued demand for goods from home and abroad, Deutsche Bank says. However, leading indicators in September pointed to an accelerating recovery.
4:00 A.M. China: retail sales/industrial production September.
by: Anna-Maria Borse, 16 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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