Market report: debt dispute slows down the stock exchanges

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Status: 05/15/2023 10:13 p.m

In view of the unresolved US debt dispute, Wall Street was not really happy. The DAX also remained undecided.

No agreement is in sight in the American debt dispute between Democrats and Republicans. Investors on Wall Street remained cautious given the crisis potential of this development. The Dow Jones started the new week with a modest plus of 0.14 percent.

Technology stocks fared slightly better. The Nasdaq 100 index ended trading up 0.55 percent.

Most recently, US President Joe Biden expressed optimism that an agreement could be reached in the difficult negotiations. Tomorrow, Biden plans to meet with senior congressmen for further talks. Market turmoil and economic catastrophe loom, experts say, unless politicians agree to raise the $31.4 trillion debt ceiling. US Treasury Secretary Janet Yellen again warned of a US default from June 1st.

In the United States, Congress sets a debt ceiling at irregular intervals and determines how much money the state can borrow. In the meantime, the current debt ceiling has been reached in the USA and the US Treasury Department has to tap into the reserves.

The US markets are already plagued by recession concerns. Industrial sentiment in the state of New York clouded over in May more than it had since the beginning of the Corona crisis. The Empire State index fell to minus 31.8 points from plus 10.8 points in the previous month. With the slump, the index value has fallen back to its lowest level since the beginning of the year.

Meanwhile, two US central bankers dampened speculation about a rate cut this year. Despite all the progress, there is still a long way to go to the stability goal of an inflation rate of two percent, said the head of the Atlanta Federal Reserve District, Raphael Bostic, the broadcaster “CNBC”. He does not expect inflation to go down as quickly as expected on the financial markets. Bostic therefore sees prospects for higher rates rather than a cut, which he doesn’t expect until 2024. Minnesota Fed District Chairman Neel Kashkari said inflation is still far too high. The Fed therefore still has a lot to do.

On the German market, the DAX almost landed on the spot after a roller coaster ride. At the end of Xetra trading, the leading German index recorded a tiny plus of three points. In view of the inconsistent quarterly figures, there was no real buying mood. Investors again focused on the impending default in the USA.

The sideways movement on the German stock market thus continues. For weeks, the DAX has been struggling in vain for the round mark of 16,000 points.

After the undecided election result in Turkey the Istanbul Stock Exchange was buzzing. The fear of an election victory for Turkish President Tayyip Erdogan in the forthcoming election on May 28 caused severe turbulence on the Turkish financial market. Dollar-denominated government bonds fell, and the cost of the country’s credit default insurance soared. Prices collapsed on the Istanbul stock exchange and trading was temporarily interrupted. Bank stocks in particular came under pressure.

The Turkish lira was little moved near its record low against the dollar the day after the election. However, market observers assumed that the lira was being stabilized artificially: “According to informed circles, Turkish state credit institutions are said to have sold dollars to support their own currency, which would explain the lira’s superficial calm,” explained Sandra Striffler, an analyst at DZ Bank. One US dollar was last traded at 19.67 lira.

For the lira, Erdogan’s defeat would have been a positive scenario because a new government under Kemal Kilicdaroglu would have immediately restored the central bank’s independence and allowed higher interest rates, emphasize Commerzbank’s foreign exchange experts Tatha Ghose and Ulrich Leuchtmann. Monetary and economic policy is now likely to be aimed at preventing the lira from falling until May 28th, just as before. However, the artificial lira stabilization is likely to be increasingly difficult for those responsible, according to the forecast by the foreign exchange experts.

After the election in Turkey, Turkish stocks are recording significant losses, the lira is under pressure.
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The euro was able to make up some ground after its recent losses against the dollar. The European common currency is currently trading at 1.0875 dollars. A troy ounce of gold cost $ 2015 in the evening.

Oil prices recovered somewhat from their recent losses. In the evening, a barrel (159 liters) of North Sea Brent for delivery in July cost 75.33 US dollars. That is 1.7 percent more than on Friday. Above all, concerns about demand because of the surprisingly sluggish economic recovery in China, but also fears of the US economy slipping into recession, had recently depressed oil prices.

Apple shares bucked the market trend on the Nasdaq. In France, the technology group is again in the sights of the authorities because of suspected product wear and tear of its smartphones. As confirmed by the Paris public prosecutor’s office, investigations were launched against Apple in December for alleged misleading business practices and so-called planned obsolescence. In February 2020, France had already fined Apple $25 million for deliberately throttling the performance of iPhones.

The biggest winner in the DAX was the Siemens Energy share after the quarterly figures were presented. With a price increase of 2.7 percent, it reached the highest level since the beginning of 2022. The analysts Vivek Midha from Citigroup and Akash Gupta from JPMorgan emphasized the strong order intake and sales development. Goldman analyst Ajay Patel spoke of “strong numbers overall”. Due to the weak development at the Spanish subsidiary Gamesa, the energy technology group now expects the earnings margin before special items for the full year to be at the lower end of the forecast range of one to three percent.

Encavis presented surprisingly good quarterly figures. The solar and wind park operator from the MDAX benefited from its expanded generation capacities and the most recent acquisition. After deducting the electricity price brakes, sales increased by nine percent year-on-year to EUR 98.8 million, with the bottom line being almost 17 percent more profit at EUR 16.6 million.

The insurance group Talanx (HDI) significantly increased its profit in the first quarter thanks to fewer major claims. At 423 million euros, the surplus was almost a third higher than a year earlier. CEO Torsten Leue sees the group on course to achieve a profit of around 1.4 billion euros this year as planned.

German media regulators are examining whether the Italian TV group Media For Europe (MFE) led by Silvio Berlusconi is gaining too much power in the media sector by increasing its stake in ProSiebenSat.1. This was confirmed by the Bavarian State Center for New Media (BLM) on Friday. ProSiebenSat.1 had previously published that MFE had increased its stake in Unterfoehringer from 22.72 percent of the share capital to 25.73 percent.

The German armaments group Rheinmetall is founding a joint venture with the Ukrainian state-owned company Ukroboronprom. The joint venture is scheduled to start work in mid-July. In a first step, military vehicles are to be repaired that were made available to Ukraine through ring exchange projects by the German government and through direct deliveries. The joint manufacture of selected Rheinmetall products in the Ukraine is planned later.

The Ceconomy share fell sharply after the figures for the second quarter of the financial year. “More was probably expected on the market after the almost six percent price increase on Friday,” commented analyst Volker Bosse from Baader Bank. Investors may have been worried about management’s statements about the challenging environment, even if CEO Karsten Wildberger was confident about the start of the second half of the year. Sales increased in the months from January to March by 5.6 percent to 5.3 billion euros. On the other hand, the net loss more than doubled to EUR 15 million – the sale of the Swedish markets had a negative impact of EUR 68 million. The SDAX company had already announced negative effects.

The IT service provider Nagarro expects lower sales growth in the current year than previously. Sales should only increase to 940 million euros, the SDAX company announced on Friday evening after the stock market closed. Nagarro had previously planned to break the billion mark this year after sales of 856 million euros in 2022.

The battery manufacturer Varta is operating in the red. Adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) were minus 2.0 (previous year: plus 38.1) million euros in the first quarter. Varta has hardly made any sales with the lithium-ion button cells for headphones since the main customer Apple throttled the production of the AirPods.

After good business figures, Dermapharm shares gained more than eight percent in the SDAX. Jefferies expert Alexander Thiel praised the strong results of the drug manufacturer. According to the expert, expectations were clearly exceeded and all areas contributed to this.

The commercial vehicle supplier Jost Werke benefited from the strong demand for trucks and increased its sales. Overall, revenues in the first quarter increased by 9.6 percent to EUR 341.6 million. Profit rose by 11.6 percent to 24 million euros.

Beyond the major indices, the Evotec share draws attention to itself. Despite a cyber attack, the active pharmaceutical ingredient researcher is initially sticking to its annual goals. However, the effects of the attack on the forecasts cannot be ruled out, the Hamburg-based company announced at the weekend. On May 4, Deutsche Börse announced that Evotec would be removed from the MDAX as of May 9. The reason for this was that the company was unable to publish its certified annual report for 2022 in time due to the cyber attack. Evotec presented the report on Saturday night and is therefore expected back in the MDAX for the upcoming index relinking on Monday, June 19.

The world’s largest gold producer, Newmont of the USA, can take over its Australian competitor Newcrest: Newcrest has accepted the $19 billion takeover bid. Newmont is thus further expanding its leading position – the group will then mine gold and copper in North and South America, South Africa, Australia and Papua New Guinea.

The electric car manufacturer Tesla has to fix a possible security risk in just over 1.1 million vehicles in China with a software update. The state agency for market regulation spoke of a product recall that will begin on May 29th. A total of three imported and two China-made Tesla models that were produced from January 2019 to April 2023 are affected.



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