Dusseldorf New corona concerns and the risk of further US tariffs on goods from Europe scared investors on Wednesday. Losses on Wall Street increased selling pressure, causing the Dax to close 3.4 percent in minus at 12,094 points. It’s the biggest daily loss in two weeks.
“The stock exchanges are at a crossroads,” said market analyst David Madden from CMC Markets. “Investors are unsure whether the rise in coronavirus cases should be seen as a new normal or as a harbinger of further lockdown scenarios.” Several US states reported an increase in infections of up to 50 percent and the death toll in Latin America exceeded the 100,000 mark, according to a count by the Reuters news agency.
As a result, the announcement that the mood in the German executive floors continued to brighten after the historic low. The rise in the Ifo index apparently even invited investors to take profits: The Dax then increased its losses.
The Ifo business climate index for June rose to 86.2 points from 79.7 points in May, as the Munich Ifo Institute announced on Wednesday. “The German economy sees light at the end of the tunnel,” said Ifo President Clemens Fuest. The managers interviewed by the Ifo assessed their business prospects and – for the first time since the beginning of the corona crisis – their situation again more favorably than last.
“The worst of the crisis is behind us, and the clear improvement in sentiment is fueling hopes of an economic recovery,” say Helaba experts. However, it is not yet possible to speak of a return to normality because the index levels are still comparatively low.
The coming trading weeks on the Frankfurt stock exchange are likely to be rather quiet – at least if one takes the turbulent trading trends in the previous weeks as a yardstick.
According to surveys, some investors have missed re-entry, so the Dax still has some room for improvement. But investor sentiment signals that the rally has been slow since mid-March. Behavioral economist Joachim Goldberg, who evaluates the survey conducted by the Frankfurt Stock Exchange, expects profit-taking from a price of 13,000 points. On the other hand, there are no signals that the index will soon crash again.
This also falls accordingly Volatility barometer on the German stock market, the VDax. Compared to the record high in mid-March, this value is almost third, at around 33 points it is only slightly above the low of the past three months.
This index reflects the fluctuation range of the stock market expected by professionals. The higher the VDax, the higher price fluctuations investment professionals expect in the coming trading days and weeks. The VDax pre-crisis level in mid-February this year was around 15 points.
“In our core scenario without a second wave of infections, we expect a” tough summer “- a volatile sideways movement with setbacks of up to ten percent,” says chief strategist Bernd Meyer from Berenberg Bank.
Violent ups and downs at Wirecard
On the day on which the previous CEO Markus Braun presented himself to the law enforcement authorities, the Wirecard share achieved the greatest increase in value in a long time. 18.8 percent plus on Tuesday, with a comparatively high trading volume of 17.2 million papers. Around 40 million pieces were traded during the crash days, but the average volume since the beginning of the year has been 3.3 million papers a day.
Trading in the share was also turbulent on Wednesday. After an increase of eight percent at the start and a price of 19.80 euros, the paper fell back significantly and closed 28.3 percent in minus at 12.30 euros.
Are hedge funds active that resolve their short speculation? Because stubbornly and with good timing, the funds bet on falling prices for the Wirecard share. And they remained stubborn at least on Monday of this week.
According to the current data in the “Federal Gazette”, your short sale quota amounts to at least 13.92 percent and has so far only decreased slightly. On Thursday, this figure was still 15.2 percent, quotas below 0.5 percent do not have to be reported. Yesterday’s new data show that little has been done so far. One hedge fund cut its rate by 0.29 on Tuesday, while two others raised a total of 0.26 percentage points.
Shortsellers bet on so-called short sales on falling prices. To do this, they borrow a share for a certain time for a fee and then sell it on the market. Your calculation: If the price drops by the return date, you can buy back the securities on the stock exchange at a lower price.
They draw the difference between the sales and the reduced buyback price as profit. However, if the price rises, the short sellers are at risk of losing.
In the past few days, however, not only hedge funds were active, CEO Markus Braun also ensured the high sales. He is said to have sold around 5.5 million of his 8.7 million Wirecard shares on Thursday and Friday. These shares are said to have been a security for a loan from Deutsche Bank. And with the price slide, the sum was no longer enough.
Long-standing traders are familiar with the problem: it was ultimately a so-called margin call. The term comes from the practice of brokers who call their customers to inform them that the available capital has fallen below the minimum amount necessary to continue the deal. In the meantime, this is done by email, but the subsequent procedure is the same. Either inject capital or sell everything – no matter how high the losses are.
The price decline for Wirecard papers also continued on the bond market. The price of a bond that ran until 2024 continued to fall and was temporarily traded at 16 cents per euro. In return, the bond yield rose to over 50 percent. For comparison: On average, the yield on bonds from European companies that have a triple B rating like Wirecard is 1.1 percent.
However, small investors are unlikely to be affected by the price losses. Both the bond and the convertible bond were issued with a denomination of EUR 100,000 per bond
This shows how much investors hate uncertainty Take Deutsche Lufthansa, for example. Since it has been unclear whether the billion dollar rescue package of the federal government will be accepted by the shareholders, the share has fallen significantly. The paper has lost more than 30 percent of its value since June 9, with a drop of 4.5 percent on yesterday’s trading day alone. Today’s title lost another 4.7 percent.
To make matters worse, nobody knows what major shareholder Heinz Hermann Thiele is up towho rejects the rescue plan. His plans remain a mystery.
The state rescue plan could have serious disadvantages for Deutsche Lufthansa. A new federal government will be elected in just over a year. And after a change of government, two state representatives could suddenly sit on the board, who generally refuse to fly.
Look at the individual values
Wacker chemistry: The SDax value lost a good five percent. Dealers pointed to a downgrading of Citigroup. The analysts lowered the valuation of the shares to “sell” from “neutral”.
Europcar: In Paris, the stock initially rose by up to 17 percent to a two-week high of EUR 2.78 before almost completely surrendering its profits and closing 1.3 percent up. According to insiders, Volkswagen is in takeover talks with the French car rental company. The VW share is 4.8 percent in line with the general market trend.
Deutsche Bank: The prospect of long-term low interest rates, on the other hand, hurt financial stocks, the analysts at Berenberg Bank wrote. Due to loss of income in the classic lending business, disappointing business figures of the institutes must be expected. The European banking index lost 4.3 percent, Deutsche Bank paper fell 5.1 percent.
Look at other asset classes
Gold is about to break the $ 1,800 mark. The price of the precious metal reached $ 1773 a troy ounce (31.1 grams) today, the highest level in about seven and a half years. The record high of $ 1921, reached in 2011, is still a long way off.
“Gold is a clear winner of the pandemic,” said market analyst Neil Wilson from broker Markets.com. The commodity received support from a weakening dollar and the flood of cheap money from central banks worldwide. In view of the increasing number of infections, further stimulus measures from the US government and the US Federal Reserve may be required. The breathtaking devaluation of money due to the expansion of central bank liquidity and government debt would continue.
“It is a foregone conclusion that the key interest rates will remain at a low level for a long time,” explained trader Alexander Zumpfe from the precious metals specialist Heraeus. “This benefits gold, which itself pays no interest and is considered inflation protection.”
Because real US interest rates (minus inflation) are negative, banks like Goldman Sachs forecast one Gold price of $ 2000 in the next twelve months.
What the chart technique says
The stock exchanges expect one brilliant economic recovery, at least for technology stocks. There is no other way to explain that the US technology indices Nasdaq Composite and Nasdaq have reached 100 new all-time highs.
This has already fueled the German stock market, which yesterday reached a new high of 12.616 points in the past two weeks.
On the bottom offers a Combination of the smoothing lines of the past 200 days (currently at 12,156 points) and 200 weeks (currently at 12,064 points) a good support. The 200-day line is an indicator of the long-term trend. If the Dax is trading above a rising 200-day line, investors see it as a positive sign.
Added to this is the upward price gap from last week (12,133 to 11,968 points), which has been successfully tested again and again and was, so to speak, the springboard for higher prices.
Such upward price gaps are often interpreted as a sign of further rising prices and are an important area of support according to chart technology. In this case, the daily low of Tuesday of the past week (12,133 points) is above the daily high of the previous Monday (11,968) of the past week.
As long as this zone of upward price gap and the two lines persists, the bulls remain on the trigger, so higher prices can be expected.
Here is the page with the Dax course, here are the current tops & flops in the Dax. Current short sales by investors can be found in our short sales database.