New all-time highs on the stock markets are putting everyone in a good mood. Whether the record chase continues is likely to depend on the upcoming inflation data. Today's start is initially unspectacular, just like last week.
26 February 2023 FRANKFURT (Frankfurt Stock Exchange). After a subdued start to the week, the stock markets finally ignited the next stage of the rally at the end of last week thanks to strong figures from chip designer Nvidia. The DAX reached a new record level of around 17,444 points on Friday and closed at a record high of 17,419 points. However, as the US indices were unable to maintain their daily highs on Friday, the German share index is starting the new week slightly weaker today at around 17,400 points. In Asia, the Japanese Nikkei continued its upward trajectory with a gain of 0.4% and also set a new all-time high during the course of the day.
In the coming days, the markets will once again focus on data on price trends in the USA and the eurozone. The recently published consumer and producer prices were higher than expected. This has put a damper on hopes of rapid interest rate cuts, which is also reflected in the rising yields on the bond market. "The inflation trend is not a one-way street (downwards), and the risk of delays on the path to monetary easing is increasing," states LBBW in its weekly outlook.
Timing of the first interest rate cut is of secondary importance
So far, however, the stock markets have not been affected in the long term. The exact point in time at which the central banks turn the interest rate dial for the first time therefore appears to be of secondary importance. Ulrich Kater, Chief Economist at DekaBank, agrees: "Obviously, the main argument is still that the central banks will cut interest rates later this year and that monetary easing will come in any case.
The sluggish economic development in Germany is also not leaving any significant traces. As the German economy is on the brink of recession due to falling investment, many companies are cutting costs. This is going down well on the stock market.
According to Helaba, the situation in the global economy is also important for earnings prospects. "At least there are signs of an improvement here, even in China," the strategists say with some optimism.
High valuation, but no castles in the air
As is usual after new all-time highs, many are asking themselves whether shares have become too expensive. According to LBBW's calculations, valuations are "historically high", at least in the USA, which is likely to dampen longer-term stock market performance. In addition, there are some characteristics, such as the concentration on a small number of stocks, that point to the formation of a bubble. On the other hand, there is "above-average earnings growth and no castles in the air such as the dotcom bubble". The analysts conclude that the stock markets are "at best in a rational exaggeration".
Hans-Jürgen Haack, chief analyst at Haack Börsenbriefe, also sees the low market breadth observed in the DAX as a warning signal that the markets "are exhausted in the short term and need a break". The experienced stock market analyst does not expect the next sustained boost in the course of the "fully intact long-term bull market" until "the markets take a breath, or a consolidation, setback or correction occurs".
Technical picture shows new momentum
From a technical perspective, this is unlikely to happen, at least in the short term. Jörg Scherer from HSBC at any rate recognizes a new upward momentum in the DAX on a weekly basis. "After the German blue chips struggled with the 17,000 mark for several weeks, the jump above it is now sparking new momentum," says the experienced chart technician. If investors interpret the price trend since December as an upwardly resolved sliding zone, then according to his calculations this results in "an imputed price target of 17,600 points". He recommends the most recent two price gaps on a daily basis at 17,280/17,158 points and 17,004/16,958 points as sensible hedging levels.
Important economic and business events of the week
Monday, February 26
16.00.USA: New home sales. The consensus expectation for January is an increase to 684,000 houses, after 664,000 were reported in the previous month.
Tuesday, February 27
8.00. Germany: GfK Consumer Confidence. The index is likely to remain deep in negative territory. With a consensus estimate of minus 29.0 (after minus 29.7), LBBW is somewhat more optimistic with minus 28.0, while NordLB even expects minus 32.9.
2.30 p.m. USA: New orders for durable goods. Economists expect an average decline of 4.5 percent compared to the previous month. Deka and Helaba even fear a drop of 7.0 percent, partly due to the slump in orders for the crisis-stricken aircraft manufacturer Boeing
Wednesday, February 28
11.00 am. Eurozone: Economic Sentiment. Deka's economists expect a confirmation of the latest trends, according to which sentiment in the eurozone is slowly recovering, mainly thanks to Spain and Italy, while Germany is clearly in the red.
Thursday, February 29
14.30. USA: Deflator for private consumer spending (PCE). After the surprisingly strong rise in consumer prices in January, Deka also expects a strong increase in the deflator, which the Fed considers to be the most important price measure.
Friday, March 1
11.00 am. Eurozone: Consumer prices. According to Deka estimates, inflation in the eurozone is likely to have eased to 2.5% in February, mainly due to base effects. The strategists expect the core inflation rate to fall to 2.9 percent.
From Thomas Koch, 23. Februar 2024 © Deutsche Börse AG
Thomas Koch ist CEFA-Investmentanalyst, Investmentspezialist für strukturierte Produkte und geprüfter Zertifikateberater. Seit Anfang 2006 beschäftigt er sich als freier Journalist mit dem Geschehen an den Kapitalmärkten.