Current Dax rate: Dax gives way slightly

Dusseldorf The German stock market starts the new trading week in a friendly manner, but slips further down the line. In afternoon trading, the leading German index Dax is down around 0.2 percent and is trading at 10,559 points.

The negative signs are increasing: According to a study, the Germans will put more money on the high edge this year. The savings rate is expected to climb to 12.5 percent this year from 10.9 percent in 2019, the economists at DZ Bank calculate. That is the highest private savings rate since 1992.

According to DZ Bank, uncertainties about job security and income prospects in particular contribute to a greater propensity to save. In return, consumption will shrink accordingly.

For example, less durable consumer goods such as cars would be bought. Private consumption in Germany is likely to fall by 2.8 percent, which would be the worst slump since reunification. The slump in consumption increases the proportion of savings in disposable income.

Overall, the disposable income of private households is expected to shrink by 1.1 percent this year, according to the DZ Bank experts. That would be the first decline since the 2009 financial crisis.

And according to the VDMA industry association, machine builders in Germany are increasingly feeling the drop in orders due to the corona crisis. In mid-April, 89 percent of the companies surveyed said they were affected by the effects of the pandemic. Overall, 45 percent of the companies report noticeable, 32 percent of those surveyed even serious order losses or cancellations.

As a result, the prices of cyclical stocks in particular are slipping. Daimler leads the list of losers with a minus of around 2.6 percent, as does the supplier Continental. In return, shares in non-cyclical companies such as the medical technology group Fresenius Medical Care (plus 3.2 percent) and the reinsurer Munich Re (plus 2.5 percent).

Investor sentiment is currently “wait and see neutral”, the possibility of a continuation of the recovery rally is limited in the short term, the risk of a setback is greater. This can also be seen in the current evaluation of the weekly Handelsblatt survey Dax-Sentiment.

Because surprisingly, the investment rate of investors is again at a relatively high level. This can also be seen from the overbought condition of the US selection index S&P 500, which rose too quickly after the price slump.

The insider barometer shows a similar picture, which analyzes the trading of Germany’s board of directors and supervisory boards in the shares of their company. Because with the recovery on the stock markets, insider buying has decreased.

The executives, who know their companies better than anyone else, go bargain hunting if they think their company’s shares on the stock market are undervalued. That is no longer so clearly the case.

Olaf Stotz, a professor at the Frankfurt School of Finance & Management, would only be able to support a new, larger rush of directors and supervisory boards to buy shares in their own companies Dax-Stands around 8500 points expected.

Look at individual values

Deutsche Bank: Germany’s largest money house is preparing for higher credit risks in the wake of the corona crisis. Actually, CEO Christian Sewing had promised a black zero in operating profit for 2020 after a billion minus in the previous year.

However, analysts now expect the bank to face a loss of around two billion euros. The share is down 1.8 percent.

Ceconomy: The restrictions on public life cause Saturn / Mediamarkt’s mother to plummet sales and lose quarterly. These numbers come as no surprise, a trader said. Nevertheless, the share of the electronics retailer loses 3.6 percent.

Philips: The Dutch medical technology group posted a significant drop in profits in the first quarter due to the virus crisis. Philips cited a drop in demand for electric toothbrushes, shavers and other health products as a result of the virus crisis as the reason for the decline. However, the share price rose 5.9 percent.

Look at other asset classes

The fall in oil prices cannot be stopped: In the afternoon, a barrel (159 liters) of the North Sea Brent cost $ 26.73, down 4.9 percent. The price of a barrel of the American grade WTI dropped temporarily by around 40 percent to around eleven dollars, the lowest level in 21 years.

While the slump in demand due to the corona crisis continues, concerns have recently increased on the US market that the oil deposits there may be reaching their capacity limits.

The slump in prices for US oil has thus amounted to almost 75 percent since the beginning of the year. Concerns about crude oil storage caused prices to plummet compared to North Sea oil, where discounts last year were 68 percent.

As market watchers from the Australia & New Zealand Banking Group reported, inventory levels in Cushing, Oklahoma, have increased by a whopping 50 percent since the beginning of March. “We still have hope of a recovery at the end of the year,” said the experts.

The EU summit on Thursday with the discussion on corona bonds has already on Monday impact on the bond market. The yield spread between German and Italian government bonds continues to increase and is now 2.32 percentage points. The yield on ten-year bonds is currently approaching the monthly highs reached last week at 1.940 percent.

This “spread” has become a kind of fever curve in the Italian economy. This risk premium reached a record level of 3.3 percentage points in 2018 when the EU Commission rejected the draft budget for the second time in November.

“Residential properties could emerge from the crisis as winners”

In any case, the Italian bond market is facing another test at the end of the week when S&P Global reviews Italy’s BBB rating with a negative outlook.

What the chart technique says

Corrections within the overall trend very often end at the 50 percent mark. Currently related to the Dax, this means that the downward trend has so far been from the record high in mid-February at 13,795 points to the low point in mid-March at 8255 points.

The 50 percent mark is accordingly at 11,025 points. With the increase to 10,820 points last Tuesday, the index of this brand has already approached.

Should the Frankfurt benchmark break this 11,025 point mark, the next resistance would be at 11,266 points, the August 2019 interim low.

The important resistance zone is in the range of 10,279 to 10,391 points. From the first-mentioned brand, the leading index started its rally in December 2018, which continued until a record high in February 2020. The brand was “confirmed” last Tuesday because the index ended trading right there.

Just below that there are so-called price gaps for which there were no quotes this year. The last gap would be closed at a Dax level of 10,097 points.

Here is the page with the DAX course, here is the current tops & flops in the Dax. Current Short sales of investors can be found in our Short sales database.

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Dax current: Dax is giving way significantly – cyclical stocks come under pressure

The release of new data illustrates the extent of the corona crisis. The savings rate is increasing and consumption is likely to shrink significantly. .

Top managers are picky about stocks

“The insiders live out their countercyclical character,” says Olaf Stotz, professor at the Frankfurt School of Finance & Management. That means: The executives who know their companies better than anyone else go bargain hunting if they consider the shares of their own companies on the stock exchange to be undervalued.

According to Stotz, this is no longer so clearly the case. “The insiders’ belief that the stock market recovery would continue in the short term appears to be limited, otherwise they would have continued to buy at the same pace,” says the university lecturer.

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From the second week of March to early April, German listed companies reported almost 400 executives’ share purchases to the financial regulator Bafin. Since then, the number of purchases has almost halved with the sharply rising share prices. Purchases over several hundred thousand euros are also largely passé.

Accordingly, the insider barometer, which Stotz regularly calculates from transactions reported to Bafin exclusively for the Handelsblatt, has dropped somewhat from its nine-month high of over 145 points in early April. Most recently, it was just under 139 points.

At this level, the barometer theoretically signals that stocks should outperform other asset classes over a three-month period. However, Stotz would not currently over-interpret this – precisely because the insider barometer has already moved away from the recent intermediate high.

Dax cheap at 8500 points?

The university professor would only support a new, larger rush of purchase by the board members and supervisory boards for the shares of their own companies Dax-Stands around 8,500 points expected. In mid-March, the Dax even hit below 8,300 points.

He had thus lost 40 percent since his all-time high of 13,795 points in February: “At this level, the stock market seems to be favorably valued for many managers,” says Stotz. According to the professor of asset management, private investors should only get back into the market if there are new setbacks.

In the meantime, the Dax, with almost 10,600 points, is again almost 30 percent above its March low and has been “only” 20 percent lower since the beginning of the year. Not only insiders, but investors don’t trust the rally yet. David Lafferty, chief strategist at Natixis Investment Managers: “There is too much optimism priced in the markets”. In his opinion, the negative effects of the corona crisis should occupy the markets for several quarters.

Rolf Schäffer, one of the leading macro strategists at Landesbank Baden-Württemberg, sees it similarly: “The markets have currently opted for a rather positive interpretation and consider the glass to be half full.” This half full glass has “but clear” Jumps and could prove to be fragile in the event of further vibrations ”.

The largest insider purchases in the past four weeks show that board members and supervisory boards were more selective than in the first week and a half in March. Purchases were mainly made from companies that underperformed the Dax.

The biggest purchase was – as on March 10th – at Heidelberg Cement. From March 17, the Merckle family of entrepreneurs in particular once again accessed via Spohn Beteiligungs GmbH. The Merckle family is a major shareholder in Heidelberg Cement and often buys millions of shares.

The purchases of more than 70 million euros throughout March are very high even for the Merckle family represented on the Heidelberg Cement supervisory board. The building materials group’s stock fell more sharply than many other stocks and has also recovered less.

Purchases from Krones and Fresenius

At KronesIt is similar, the world’s largest bottling plant manufacturer for beverages and food, which is listed in the small value segment SDax. Here supervisory board member Petra Schadeberg-Herrmann bought shares through Schawei GmbH for a good five million euros. Schadeberg-Herrmann and board member Norbert Broger had already invested millions in the shares at the end of February and beginning of March.

The third largest share purchase in the past four weeks was also made by a company that insiders had accessed in early March. At the Healthcare company Fresenius This time, four board members and four supervisory board members bought shares. The Dax value of Fresenius shares had also suffered more than the leading index, but has since made up half of the loss.

It is not only the largest share purchases by insiders that are countercyclical, but also sales. For example, supervisory boards parted from shares in the real estate companies Patrizia and LEG, both of which have recovered well from short slumps.

Even more striking is the sale of the Hellofresh cookbox mail order company from the MDax of medium-sized values. Co-founder Thomas Griesel sold through TWG Ventures GmbH for shares valued at 14 million euros. Co-founder Dominik Richter also bought shares via DSR Venture GmbH, and board member Christian Gärtner also accessed them – but both on a comparatively small scale.

The Hellofresh share had also lost almost 30 percent between early and mid-March. However, it fell only slightly below the level at the beginning of the year and has soared to almost 70 percent since then. No other stock outperformed a German selection index.

The sender of recipes with suitable ingredients benefits enormously from the corona restrictions and closings of the restaurants. The company itself cannot foresee whether this will remain the case. In any case, management is reluctant to make a forecast for the current year.

More: Yield in Corona times: With which investments you can still earn money.

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Insider barometer: Top managers are picky about stocks

Managers only bought titles of their own companies on a large scale until the beginning of April. Since then they have held back – and are waiting for better courses. .

Dax makes up almost 600 points after heavy losses at the start

“The recession will be at least double-digit worldwide in the second quarter”

Dusseldorf The Dax experience another volatile trading day. After an initial minus of five percent, the index rose to 1.3 percent at 1 p.m. and then slid back into the minus. In afternoon trading, the Frankfurt benchmark slipped 1.5 percent from the previous day’s close and stands at 8798 points. There are almost 600 points between daily low and high.

Two news items contributed significantly to the interim recovery: First, the US Federal Reserve is launching new measures to combat the economic consequences of the coronavirus pandemic. Accordingly, it wants to buy up unlimited government bonds and mortgage-backed securities.

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Economists are demanding a protective shield for banks

Frankfurt The worldwide sudden slump in economic activity in response to the corona epidemic represents a risk that has so far been neglected for the financial system. Moritz Schularick, a well-known expert in financial crises from the University of Bonn and Sascha Steffen from the Frankfurt School of Finance share this assessment thesis paper published on March 16. In it, they propose a large European protective shield for the banks.

This is to prevent the economic crisis from leading to a banking crisis, which in turn would hinder the economic recovery after the epidemic ended.

Even if it were possible to prevent a wave of bankruptcies with liquidity aids for companies, such as the Federal Government decided, the decline in profits, the slump in the stock markets and losses in value in other financial markets would leave deep marks on banks’ balance sheets.

The two economists are thus playing a very different tone than the responsible regulators and politicians. The President of the German Financial Supervisory Authority Bafin, Felix Hufeld, said in an interview in the Handelsblatt on Tuesday: Corona represents a considerable burden for the financial sector, but “no systemic risk”.

Finance minister Olaf Scholz also said on Tuesday in the Handelsblatt interview that it was too early to talk about using the ESM rescue fund. Tobias Adrian, director of the Monetary and Capital Markets Department of the International Monetary Fund (IMF), wrote on March 11 on the IMF’s Corona weblog: “The good news is that banks are more stable than before the 2008 financial crisis.” Therefore, the risks to financial stability posed by the banking sector are much lower today, despite falling bank stock prices.

Schularick and Steffen see it differently. “We learned in the last crisis that it doesn’t matter what regulators or central banks think about bank stability,” they warn.

Liquidity deduction must be avoided

It is an alarm sign for them that European bank stocks have already lost half of their value. And that was before the course slumped again last Monday. Most banks would only have a fraction of the value of their book value on the stock market. “What matters is the perception of the markets.”

It is imperative to avoid a liquidity withdrawal from the banks, which turns a liquidity crisis into a solvency crisis, that is, that banks go bankrupt. Therefore, there should be no doubt that the European Central Bank and national governments are doing what is necessary to ensure financial stability. That must also apply to banks in countries with budget problems.

“Acting early and resolutely ultimately saves money,” the two economists recommend, pointing to the mistakes that Europe made in the last crisis. There it always took too long to decide something, and that was insufficient.

Because some countries do not have the money for this, common funds should be used. Liquidity aids for banks, such as those provided by the federal government for other companies, are not a good solution for banks. That was shown in the last financial crisis. Because then the banks would remain undercapitalized and would not be able to fulfill their function of providing sufficient loans in the long term.

Specifically, they are proposing to provide 200 billion euros for equity investments in banks through the European Stability Mechanism (ESM). That would be half of the current market capitalization of European banks. The money must be ready before there is a serious banking crisis. According to the current contractual situation, the funds that can be used for bank investments via the ESM are limited to 60 billion euros. Schularick and Steffen find that far too little.

It must also be the “first line of defense”, so it should not be used until the national governments are at the end of their possibilities. According to her verdict, the mutually reinforcing feedback of financially bled governments and banks in need of financial assistance was the most important reason for dealing with the last financial crisis in Europe less successfully than in the United States.

And they learn another lesson from the last crisis. Back then, the reorganization of the US banks worked much better than that of the European ones, also because the United States also forced healthy banks to inject capital. In this way, it was avoided that banks that receive capital injections are outed as bankruptcy candidates and no longer receive private money. Europe should take this as an example in this crisis.

Intensify monetary and fiscal policies

Tommaso Monacelli, professor at the Italian Bocconi University, on the other hand, holds out that before the banks can be pumped out again with a lot of public money, the artificial financial restrictions for the national governments should first be relaxed. “It would be better to intensify the cooperation between monetary policy and fiscal policy to make it clear that this is not taboo,” he writes.

The ECB should explicitly advocate governments spending the money needed to deal with the crisis and commit themselves to ensuring that financial markets do not punish individual governments for this.

The IMF economist Adrian already diagnoses an increase in the cost of loans for companies. Above all, he sees monetary policy as being challenged to deal with this. “They can quickly help loosen credit conditions by lowering interest rates and providing liquidity,” he explains.

The economic historian Adam Tooze from Harvard University, on the other hand, expressly welcomed Schularick and Steffen’s suggestion. “The euro area needs to start talking about how to prevent a destabilized banking system from deepening and prolonging economic agony,” he comments. Because that would trigger a political stress that the currency area could hardly cope with.

Schularick and Steffen do not comment on the question of whether and how the ESM, as capital owner, should get involved in the management of the banks. In the last financial crisis, the federal government had invested in banks, but had given up voting rights.

More: Bond trading almost comes to a standstill – concern about bankruptcy among companies

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