The dynamics of the second corona wave surprised many stock marketers. Even if a real crash in prices is very unlikely, the situation remains fragile. The uncertainty of market participants in view of the further increase in the number of corona cases and political imponderables such as the US presidential election, the (unsuccessful?) Struggle for the US aid package and the hanging game over Brexit remains high. But there are also opportunities. A weekly outlook.
The harsh Corona reality should prevent big jumps on the German stock market in the new week. After the hope of another US economic stimulus package to combat the economic consequences of the pandemic had supported the prices at the beginning of October, concerns about a loss of control over the development of the infection are now growing.
Chief economist Ulrich Kater from Dekabank wrote that although the infection rate seems to be worst in Europe, the numbers in the USA also continued to rise. This will result in economic setbacks in the current quarter: “A slump like the one in spring is not to be feared, because the economy has become more flexible. But further declines in overall economic activity are possible.” Overall, the risks would increase and in such a situation market participants would become more cautious.
On Friday, the DAX managed to bring a very turbulent week to a conciliatory end. The leading index started the weekend at 12,909 points – with a week minus of a good one percent.
From a technical chart point of view, however, the situation on the DAX does not appear too tense, wrote the authors of the stock market letter Futures exchange von Bernecker: “As long as the DAX stays in the previous range, nothing burns.”
It is now important that the lower edge of the month-long trading range is kept at around 12,500 points, but even a decline of another 500 points to 12,000 points would not be a catastrophe, even the opposite: At this level, the prices could have fallen so far that the Investors are no longer ready to sell more stocks at such a low level.
And this would then also be “the surest guarantee that an autumn rally will be possible”. The prerequisite for this is that the news status regarding coronavirus is not too negative.
Focus on economic data
In addition, investors should also take a look at economic data in the new week in order to better assess the economic consequences of the pandemic. According to analyst Claudia Windt from Landesbank Helaba, the German and European purchasing manager indices should prove on Friday in the reporting week that the economy is getting bumpy in this country. At the same time, however, the Chinese growth figures for the third quarter at the beginning of the week would show that the economy there is on a solid recovery path. The country has known how to avoid a second wave of infections so far.
All in all, according to Windt, there should hardly be any positive impulses for the capital markets in the new week that would allow investors to switch fully back to risk mode – i.e. buy heavily. Rather, security should be preferred, especially since the Brexit hanging game is not over yet.
British Prime Minister Boris Johnson now expects a hard break without a treaty with the European Union (EU) on January 1st. The EU evidently has no interest in a free trade agreement desired by Great Britain, as with Canada. Accordingly, one now expects a relationship like with Australia, i.e. without a contract.
First German companies with quarterly figures
Business figures from companies are still quite rare in the new week. The pharmaceutical and laboratory supplier reported on Tuesday Sartorius over the past quarter before the Wednesday Software AG presented their results. In the further course of the week then follow with the telecommunications equipment supplier Adva Optical Networking and the personnel service provider Amadeus Fire (both on Thursday) as well as the electronics dealer Ceconomy and the seed company KWS Hour (both on Friday) four companies listed in the SDAX small cap index.
According to analyst Michael Bissinger from DZ Bank, the reporting season for the third quarter should show that companies are still suffering from the coronavirus, but significant progress has been made since the low point in the second quarter.
The assessment is no coincidence: in the past few days, companies like Daimler, BASF, Evonik and Covestro Surprised positively with their key data for the third quarter.
However, according to Bissinger, in addition to Corona and a large number of political risks, the high valuation level that shares have now reached has a dampening effect on price development. (With material from dpa-AFX)
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