Many economists assume that the unemployment rate of 3.5 percent will skyrocket in the wake of the wave of redundancies triggered by the virus pandemic: leading monetary authorities of the Federal Reserve expect an increase to double-digit figures. “The labor market situation in the United States can be described as catastrophic,” said the analysts at Landesbank Helaba.
The US unemployment rate will be released tomorrow Friday as part of the March job report. However, some of the statistics are collected before the outbreak of the corona crisis. So only the April values should provide more information.
These numbers didn’t just impact the stock market. The gold price rose from $ 1,580 to $ 1,603 per troy ounce and is currently up 0.8 percent. The price of silver increases by almost four percent to $ 14.53 an ounce.
Yesterday, Wednesday, the leading German index went down again: He lost 3.9 percent and closed at 9545 points – that’s a minus of 390 points. All 30 DAX values were negative yesterday. The ratio of winners to losers in the overall market was also clearly negative at 203 to 633.
Many companies change their forecasts
It is a dangerous mixthat continue to weigh on the stock market. Economic development is clouding over, and more and more companies are moving away from their previous forecasts. However, reports of short-time work continue to increase.
Since the beginning of the year, the 160 companies listed in the Dax, MDax and SDax indices have already had 59 changes in their forecasts, as the service provider for financial communication EQS in Munich counted.
The company did not determine whether the individual changes in the outlook were triggered by the corona pandemic. However, the fact that the vast majority at 51 occurred after February 16, when the crisis was picking up speed, suggests a connection.
According to investor sentiment, the Situation on the German stock market somewhat eased again. The evaluation of the survey conducted by the Frankfurt Stock Exchange shows that local investors with a medium-term investment horizon are now increasingly relying on falling prices, presumably due to some “frightening” economic forecasts.
According to sentiment analysis, such behavior is a contraindicator. According to the behavioral economist Joachim Goldberg, who evaluates the survey, such bad forecasts have the advantage that they can hardly be undercut by reality. In addition, investors are now realizing that the economic consequences of the corona crisis will be considerable.
He sees the overall development as positive because investors would probably buy again at a significantly lower level.
Speculation on falling prices still at four values
In the past trading week they had Hedge funds still with their speculations contributed to the fact that there was an intermediate recovery on the German stock market. (Read: How Ray Dalio’s Billion Bet Winned Dax)
And how are the hedge funds currently behaving? Bridgewater, Dalio’s hedge fund, has resolved its speculation on falling prices at twelve DAX values. Or more precisely: the quota for all twelve stocks fell below the reportable limit of 0.5 percent of freely tradable shares.
The other funds that continue to focus on falling prices focus on four values: Covestro (1.7 percent), Deutsche Bank (2.9 percent), Germans Lufthansa (9.78 percent) and Wirecard (4.22 percent). The number shows the level of the short sale rate of freely tradable paper (as of Tuesday).
“When planning wealth, the rule is: never get out completely!”
Betting on falling prices in the Technical language Called short sales, operate according to the following principle: Investors borrow shares from companies where they expect price losses. They sell these papers afterwards and hope that the prices will drop. Then you can buy the shares back later and give them back to the lender. The difference between the short sale and the subsequent buyback is then the profit.
All of this leads to the conclusion: Trading with these four DAX values is likely to become turbulent in the coming weeks. On the one hand, the outlook for these stocks is negative. But the Hedge funds will have to buy back the securities at some point.
This particularly affects Lufthansa’s share certificates, which slid to their lowest price level since 2012 on Wednesday. Almost ten percent of all freely tradable shares have to be bought back by the funds.
A calculation example shows that this buyback is likely to have a significant impact on the price. Of the 478 million freely tradable Lufthansa shares, 46 million shares are “sold short”. With a daily trading volume of around ten million units in the past week, this buyback should not be quick.
Look at other asset classes
The prospect of a prolonged crisis in the United States weighs on the yuan. The chinese currency falls, a dollar costs 7.1283 yuan at the top 0.4 percent more and as much as it has not in almost half a year. In China, production is ramping up again after the corona virus outbreak, but customers are missing because the global economy is in quarantine.
Of the Oil price benefits from mediation efforts by US President Donald Trump in the dispute between Saudi Arabia and Russia. A barrel (159 liters) of light US oil costs nine percent more at $ 22.15, while North Sea oil of the Brent variety costs 10.1 percent to $ 27.23 per barrel.
According to a report by the “Wall Street Journal”, Donald Trump wants to meet with the CEOs of the largest oil companies on Friday to discuss ways out of the difficult situation. According to this, both aid for industry and punitive tariffs on oil exports from Saudi Arabia are under discussion.
Look at the individual values
Rocket Internet: According to the start-up investor, it is financially prepared for burdens caused by the coronavirus pandemic, but the share nevertheless falls by 1.97 percent. The bottom line was Rocket, whose biggest startups like Global Fashion Group or Home24 are now listed on the stock exchange last year, a profit of 280 million euros. In 2018, a profit of 196 million euros was incurred.
Hella: The auto parts supplier was hit by the corona pandemic in the third quarter of its 2019/20 financial year. Nevertheless, the headlight specialist is still within the expected range in the first nine months. For the full year, the board had already cashed its annual targets in mid-March due to the corona crisis. The share gains 0.16 percent.
United Internet: They are up 0.15 percent United Internet-Shares. The telecommunications provider plans to launch a new share buyback program with a volume of up to 150 million euros. A clear contrast to many other companies. The reinsurer Munich Re has, for example, stopped its current buyback program.
What the chart technique says
Although there was no significant technical decision on Wednesday despite the high losses, the trading day was also not helpful. So the Dax was unable to close the small downward price gap.
Such downward price gaps arise when the daily low of the previous day is above the daily high of the subsequent trading day. The daily low on Tuesday was 9703 points, the daily high on Wednesday was reached at 9686 points.
On the other hand, the previous week’s low of 9453 was not fallen below. According to the Düsseldorf-based bank HSBC, the Dax will only go back into crisis mode at prices below 9070 points.
The Frankfurt benchmark has moved far away from the important brands on the top. The decisive factor is the space between 10,138 and 10,391 points inclusive. Among other things, there is the low of December 2018 with 10,279 points, the starting signal for the rally until mid-February 2020 with the previous record high.
“This is the decisive hurdle in chart technology, the skipping of which would put the German standard values on a quick recovery path,” say the technical analysts at Düsseldorfer Bank HSBC.
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. “