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Düsseldorf Price losses continue on the German stock market. At noon the Dax loses four percent and is quoted at 11,573 points. For the first time since mid-May, the index slipped below 12,000 points. The daily low is 11,555 points, more than 500 points below yesterday’s closing price.
According to the technical analysis, there is no end to the price loss. The new target is 11,000 meters, only prices above 12,200 points would change the situation.
At prices below 11,000 points, more precisely 10,768 points, the main German index would return to the bear market. It is currently still a fix. According to market technology, losses of more than ten percent are considered a correction, a drop of more than 20 percent as a bear market.
In addition to discussions on a “blockade light”, which should however take the economy into account, the US elections on November 3 represent the main burden on equity markets.
There is already a project on the stock markets for the scenario of an uncertain election outcome. That was the 2000 election. At that time, it took about five weeks after the November 7 vote before the winner was determined.
Republican George W. Bush prevailed against American Democrat Al Gore after a legal tug-of-war and another vote count in the state of Florida. But it all happened peacefully.
Equity markets reacted to this uncertainty in 2000 according to the usual pattern: after the elections with no final result until the end of the legal dispute, the leading German Dax index and the US selection barometer fell by about twelve percent. Mind you, in a peaceful discussion.
Exactly 20 years later, investors want to avoid such high price losses and sell before the election. It was different in 2000. Investors eagerly awaited the US election, and in the two weeks before the vote, the Dax and the S&P 500 were up about seven percent.
Economic historian Barry Eichengreen coined a phrase for this behavior: “History does not repeat itself, it rhymes.”
Look at the individual values
German bank: Thanks to the capital market boom, Germany’s largest financial institution surpassed expectations in the third quarter and now appears to be thinking about acquisitions as well. Initially, the shares could not have benefited from satisfactory figures, but now the document is up about two percent.
BASF: Chemical company BASF is reaffirming its annual goals despite rising numbers of infections and concerns about another blockade. However, on the premise that severe restrictions on economic activity will not be renewed to contain the pandemic, for example through closures. This leads to a 4.2 percent decrease for the newspaper.
Puma: The stake lost 3.6 per cent in value. Although the sporting goods manufacturer got back on the growth path in the third quarter, CEO Björn Gulden remained cautious given the growing number of infections. Puma has not yet provided a forecast for the year as a whole.
Beiersdorf: Dax’s biggest loser is the company’s share of consumer goods with a minus of over six percent. Beiersdorf managed to stabilize sales between July and September and to some extent offset the bleak second quarter. But the group questions its medium-term profit target, which is likely the reason for the sell-off.
Cancom: On Wednesday, a less optimistic than hoped for profit forecast caused problems for Cancom investors. Meanwhile, the shares of the Munich IT consultancy company fell by more than ten percent to 34.90 euros. The prices were lower than those of the last seven months. Instead of the expected moderate earnings growth, the company is now assuming a decline.
This decline in prices is likely to have particularly pleased short sellers, who have begun to rely on falling prices to win crown crisis stocks such as Cancom. According to the Shortsell.eu website, the so-called short selling rate in Cancom is 8.92% of all freely tradable shares. This is a high value compared to other cards.
See other asset classes
Hardly a trading day goes by on which The euro and the dollar did not hit a new record against the Turkish lira. This is also the case this Wednesday.
The new record against the dollar is 8.3177 lire, while against the euro it is 9.7872 lire. As a reminder, it was only on Monday this week that the eight lira mark against the dollar was first broken. The Turkish currency has lost more than 44% against the euro since the beginning of the year.
More on the topic:
In the face of such a dramatic collapse, the exact price predictions of how low the lira could fall are unreliable. But soon new records will be reached of ten lire against the euro and nine against the dollar. The Turkish central bank had previously raised its inflation expectations for 2020 by more than three percentage points to 12.1 percent.
Two questions in particular come to mind: What can the government do against decline? And from what level of the exchange rate do significant payment defaults occur?
The first question has a quick answer: for Commerzbank foreign exchange analyst Tatha Gose, who has criticized Turkish financial policy for several years, this would be a major hike in the emergency rate, similar to that of the previous currency crisis in 2018. would not be a credible long-term political reaction. “However, a similar rise in the emergency rate as it was then may be the most likely attempt to break the dynamics of devaluation,” says Ghose.
It is difficult to answer the question of payment defaults. According to Ghose, there is no “clear limit”, but rather a “distribution” of foreign currency liabilities. It is possible that a certain percentage can no longer be served.
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Is politics reacting? Or is Turkey hoping that the crown pandemic will subside and that a political easing between the EU and Turkey will strengthen the exchange rate?
Meanwhile, policy makers could provide liquidity lines to avoid filing defaults at those exchange rates.
German government bond yields fell to their lowest level since mid-March, while Italian government bond yields rose ahead of the ECB’s monetary policy meeting on Thursday.
The yield on ten-year German bonds fell three basis points from minus 0.644 percent. In March of this year, this value slipped in the wake of the collapse of the crown, the level was below 0.854%. Italy’s 10-year yield was now four basis points higher at 0.74%.
The price of oil is falling significantly. The North Sea Brent variety costs 3.5% less at around 39.77 per barrel (159 liters). The price of US WTI light oil fell more than four percent to $ 37.94. The threatened drop in demand following the pandemic with simultaneous growing supply is negatively impacting prices, stockbrokers said. The surprisingly strong increases in US inventories also fit this picture.
Koch, US stock market expert: Wall Street ignores good quarterly data
What the graph technique says
After yesterday’s fall in prices, Tuesday, below the 12,200 area, where there are many important resistances, the Dax has activated a new price target. According to analysts at HSBC, this translates into a calculated discount potential of as much as 1,200 points, which would be a price target of around 11,000 points.
The June low of 11,598 points marks an important milestone on the road to this region. The situation would only improve if the Dax were to break through the 12,200 area again.
Above that lies a new bearish price gap that opened on Monday of this week. Such downward price gaps occur when a trading day’s low point is above the next day’s high price.
In this specific case, last Friday’s lowest price was 12,515 points, and yesterday’s Monday’s highest price was 12,405 points. According to the chart analysis, this is considered an important resistance. In the specific case, this would be exceeded if the Dax exceeded 12,515 points.
Here go to the page with the Dax course, here you can find the current tops and flops in the Dax.
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