DAX Surges Above 16,000 Points as Investors Await Central Bank Decisions

news 10-Jun-2023 Business

DAX jumps above 16,000 points

The DAX has started the shortened trading week in spectacular fashion, conquering a new annual high above 16,000 points and moving ever closer to its record high.

Investors at the Frankfurt Stock Exchange have brushed aside all concerns and uncertainties this morning, diving into equities. The DAX jumped 0.6% on XETRA shortly after the start of trading, reaching 16,011 points. This is well above the previous year’s high of 15,922 points, which was set just last Friday.

Further impulses from central banks?

The German benchmark index is now trading at its highest level since January 2022 and is edging closer to its previous all-time high of 16,290 points at the end of 2021. In fact, at its peak today, the DAX is only 1.7% away from its record high. Market observers, however, believe that an additional price driver is needed for the DAX to reach its all-time high. Central bank decisions in the coming days could be one such driver.

Fed and ECB in focus of investors

This week, both the US Federal Reserve and the European Central Bank (ECB) will decide on their future monetary policy path. Currently, it is expected that both banks will raise their interest rates by 0.25 percentage points in order to finally get a handle on high inflation. Investors are likely to be particularly interested in the statements by Fed chief Jerome Powell regarding future interest rate policy, according to IG market expert Christian Henke. “Overall, investors are hoping for a rate summit following the decision on May 3rd.”

US faces default – again

Meanwhile, US Treasury Secretary Janet Yellen’s warning of a possible government payment default as early as June 1st is causing little concern in the market at the moment. If the debt ceiling is not raised soon, a possible unprecedented default by the US government could occur, which could push the global economy into crisis, says Yellen. However, investors know that in the past, a US payment default has always been avoided.

JPMorgan acquires First Republic Bank

The focus for investors remains on JPMorgan’s emergency acquisition of First Republic Bank. The collapse of the regional bank is the largest US banking collapse since the downfall of former credit giant Washington Mutual, which JPMorgan also acquired during the 2008 financial crisis. First Republic is already the third US bank to collapse this year due to massive outflows of funds triggered by liquidity concerns.

Dow Jones and Nasdaq with slight losses

On Wall Street yesterday, investors tended to view JPMorgan’s emergency acquisition as a positive development for the stabilization of the financial sector and for large banks, but as a warning sign for regional banks. While shares of JPMorgan and other large banks rose, shares of smaller institutions fell. The Dow Jones index closed 0.1% weaker at 34,051 points, the tech-heavy Nasdaq also fell 0.1% to 12,212 points, and the broad S&P 500 closed almost unchanged at 4,167 points.

Nikkei closes slightly higher

Trading in Asian markets was mixed this morning, with changes remaining modest. In Japan, stocks were barely changed ahead of the upcoming holidays. The benchmark Nikkei 225 rose slightly by 0.1% to 29,158 points. The Hang Seng index of the Hong Kong Special Administrative Region recently rose 0.3%.

Euro rises ahead of inflation data

In early forex trading, the dollar weakened slightly, while the euro rose 0.2% to $1.0987. Last week, the European common currency rose to $1.1094, its highest level in over a year. The European statistical office is due to release its first estimate of inflation in the eurozone for April this morning. Analysts expect the inflation rate to rise slightly to 7.0% from 6.9% in March. The price of an ounce of gold this morning is just under $1985.

Oil prices remain virtually unchanged

Oil prices have seen little movement in early trading. This morning, a barrel (159 litres) of North Sea Brent for delivery in July was unchanged at $79.31. The price of a barrel of American West Texas Intermediate (WTI) for delivery in June rose slightly by two cents to $75.68. This means that the losses in oil prices seen at the start of the week have not continued. Recent concerns about a weaker economic outlook in China have weighed on oil prices.

Infineon Launches Billion-Euro Project for Semiconductors in Dresden

Infineon’s stock is in focus this morning as the chipmaker begins expanding its plant in Dresden. The groundbreaking ceremony will be attended by EU Commission President Ursula von der Leyen and German Chancellor Olaf Scholz. The “Smart Power Fab” is expected to be completed by 2026 and will see Infineon investing €5 billion to increase its semiconductor production and create about 1,000 new jobs. The investment is expected to make Europe less dependent on semiconductors from the US and especially Asia.

Nio Challenges Volkswagen for Market Share in Europe

Chinese auto provider Nio aims to challenge Volkswagen for market share in Europe with two new electronic car brands, according to CEO William Li. Meanwhile, VW supervisory board member Wolfgang Porsche has declared his retirement and plans to be re-elected for another five-year term at the upcoming shareholder meeting.

Adidas Takes Aim at US Sports Market

Sports equipment manufacturer Adidas has set its sights on claiming a larger share of the US sports market. The company’s North American CEO Rupert Campbell stated that Adidas aims to concentrate on things “that relate to the US, especially sports”.

KMW and Rheinmetall end Dispute over “Leopard 2” Tanks

Defense companies Krauss Maffei Wegmann and Rheinmetall have resolved a legal dispute over the copyrights of the “Leopard 2” tank. The Munich District Court confirmed that the parties had reached a settlement, without disclosing its content.

Traton Increases Margin Forecast

VW subsidiary Traton has raised its full-year profit forecast following strong Q1 results. The group now expects an operating profit margin before special items of 7-8%, up from 6-7%.

Stabilus Benefits from Tax Refunds

Auto supplier Stabilus has profited from growing car production in Europe and improved industry business in North America. The company’s overall revenue rose by 10.5% to €310.6 million, while profits increased almost two-thirds to €42.6 million YoY, mainly due to tax refunds. Koblenzer confirmed its full-year outlook.

Patrizia Hires DWS Former CEO

Real estate investment company Patrizia has recruited former DWS CEO Asoka Wöhrmann, who will replace the firm’s founder Wolfgang Egger as CEO. He is expected to take over after a brief settling-in period.

BioNTech/Pfizer Prepared for Price Cuts

Pfizer and BioNTech are reportedly willing to offer price reductions for vaccine contracts with the EU. They are willing to offer approximately €10 for each of the 70 million doses that have been cancelled.

IBM Replaces Humans with AI

IBM has announced it intends to employ fewer people in certain roles, as their tasks can be carried out by artificial intelligence-based software. IBM CEO Arvind Krischna predicts that AI and automation could replace around a third of personnel management positions in five years.

BP Exceeds Earnings Expectations

BP’s Q1 results exceeded expectations, with a special one-time gain from selling a petrochemicals unit and strong trading results. The company’s adjusted Q1 profit was €5 billion, a 20% YoY decrease.

Morgan Stanley Plans Additional Layoffs

Morgan Stanley reportedly plans to cut around 3,000 jobs in Q2 due to sluggish business activities and the challenging economic climate. It is the second time within six months that the bank has to lay off employees.

Logitech Suffers from Recession Fears

Computer accessory manufacturer Logitech has reported a continued decline in revenue, owing to growing customer concerns regarding an economic downturn. The company’s Q4 revenue fell to $960 million YoY compared to $1.23 billion in the prior year.

Geberit Profits Fall Due to Volume Decrease

Sanitary technology company Geberit reported a 2.3% decrease in earnings due to falling sales volume and unfavourable currency exchange rates. Despite a 12% price increase, the Swiss company’s revenue fell by 8.9%.

Qantas Installs First Female CEO

Qantas has announced that Vanessa Hudson, the company’s current CFO, will take over as CEO in November, becoming the airline’s first female CEO in its history.

Chip Developer Arm Begins Preparations for IPO

Softbank-owned chip designer Arm, whose technology is used in virtually all smartphones, has taken its first step towards an IPO. The company has confidentially submitted a draft filing to the US SEC, and the value and price of the placement of Arm shares will be determined

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