Weekly outlook: Healthy reduction of exaggerated expectations

Bad news is keeping the DAX in check. Improving growth and earnings prospects, however, speak against a real price slide. From a technical chart perspective, it also looks like stabilisation, not further losses.
 

22 April 2024. FRANKFURT (Börse Frankfurt). The geopolitical tensions surrounding Israel’s attack on Iran continue to cause nervousness on the markets. However, there have been no major setbacks so far. “However, the headline risk remains elevated,” explains Ralf Umlauf from Helaba. “There could be an increase in risk aversion at any time, which would support the bond markets and other safe-haven assets and probably also drive the oil price to new highs.”

The DAX stood at 17,850 points on Monday morning after closing at 17,737 on Friday. The most recent record high of 18,567 points is now a long way off. The data from the USA is mixed: while the Dow Jones rose slightly, the S&P 500 fell. The Nasdaq 100 recorded significant losses, slipping by more than 2 percent to its lowest level since January, partly due to heavy losses by Netflix and Nvidia.

Helaba does not expect a general trend reversal – i.e. the transition to a bear market. “Rather, we see the recent price falls as a healthy reduction in exaggerated expectations and short-term technical overheating,” explains Umlauf’s colleague Markus Reinwand. In the medium term, improving growth and earnings prospects point to robust stock markets. “In this respect, the current correction could certainly provide opportunities to selectively expand positions.”

“Every disappointment harshly acknowledged”

Robert Halver from Baader Bank takes a look at the USA. “The reporting season that is starting for Big Tech will be a test for share sentiment,” explains Halver. As only stable earnings growth is expected, the bar for positive surprises is rather low. It all depends on the outlook. And here the “Magnificent 7” have intact business models – with cloud computing, AI and security software. “Any disappointment would be harshly acknowledged on the stock markets. This punishment has already been felt by a few major US banks.”

“DAX is crumbling away”

Technical analyst Christoph Geyer expects the DAX to at least stabilize. “The DAX is crumbling along, but is not coming under sustained pressure.” This behavior could well continue for a while. A latent support zone was reached on Friday, with an intraday turnaround in sentiment. The body of the candle is too large for a classic hammer. “Nevertheless, this turnaround in sentiment is certainly suitable for an end to the recent downward trend,” says Geyer. The indicators also at least point to stabilization. Some of them have already generated buy signals. “However, the data from the USA is not very promising, which is why holding at the support level would be a success for the start of the week.”

Important economic and business events of the week

Tuesday, 23 April 

10.00 am. Eurozone: Purchasing Managers’ Index April. According to Commerzbank, the Purchasing Managers’ Index for industry in the eurozone resumed its upward trend in April, which was interrupted in February/March. The improved conditions also point to a further rise in the index for the services sector.

Wednesday, 24 April 

10.00 am. Germany: ifo Business Climate April. The mood in Germany is poor, but improvement is in sight, explains DekaBank. The ifo Business Climate will therefore rise for the third time in a row – and noticeably at that. Both the situation and future assessments will improve.

2.30 pm. USA: New orders for durable goods March.

Thursday, 25 April 

2.30 pm. USA: GDP 1st quarter. According to Commerzbank, the US economy grew by 2.2 percent (annualized) compared to the previous quarter. Private consumption is once again a strong driver. Residential construction also benefited from the temporary fall in interest rates. However, the pace is slower than in the fourth (3.4 percent) and third quarter of 2023 (4.8 percent).

Friday, 26 April 

2:30 pm. USA: Price index consumer spending excluding food and energy March. According to DekaBank, the data already known indicate an increase in the rate, which is closely watched by the US Federal Reserve, to 2.7 percent. From a monetary policy perspective, however, the definition excluding food and energy is more relevant. The bank expects a decline to 2.7 percent here. However, this is not sufficient for a prompt turnaround in key interest rates.

April 26/27: Invest Stuttgart trade fair. Banks, online brokers, securities traders and issuers, fund companies and listed companies from Germany and abroad present themselves and showcase their latest products and services.

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