The mood on the German stock market is likely to remain gloomy for the time being: the first quarter was strong, but April has been weak so far.
Stock market experts believe that the leading German index is still in correction mode. Optimists talk about a “swinging exchange” or a “breather.” Nobody expects the Dax to make a new quick attempt to overcome the record of 18,567 points reached after Easter. However, experts consider a course correction towards 17,700 points perfectly possible, given the current news situation.
“Both June and July dates for a rate cut are off the table”
This is not surprising, because in the US, according to March inflation data, at least that is what chief market analyst Jochen Stanzl of CMC Markets believes: “both the June and July dates for a “interest rate cuts are off the table.” The only reason this did not lead to a major drop in the stock markets was that the majority of the market assumed that the US economy could tolerate higher interest rates for a longer period of time. “Now the reporting season must show whether this also applies to individual companies.”
It won't be long before it is put to the test. After the first US banks kicked off the reporting season in the world's largest economy, other companies will follow in the new week: US investment bank Goldman Sachs will present its figures on Monday, as will Morgan Stanley, Bank of America and pharmaceutical and consumer goods companies. Johnson & Johnson company on Tuesday.
In Europe, the start will be on Wednesday by the chip industry supplier ASML and in this country by the DAX group Sartorius. The pharmaceutical and laboratory equipment manufacturer plans to publish its quarterly balance sheet on Thursday. The consumer goods manufacturer Beiersdorf already reported on the evolution of its sales on Tuesday. However, reporting season doesn't actually start until next week.
The potential for disappointment in the United States is greater
This means that investors around the world are likely to remain torn between concerns about interest rates and profit fantasies that are increasingly verifiable. The potential for disappointment could be greater in the US, because while the bar is very high in the world's largest economy, in Europe analysts have already lowered their expectations somewhat, as LBBW analyst Frank Klumpp states.
On the economic side, the main focus of the new week in the US will be on retail data for March, which will be released early in the week. Ultimately, the question is whether “the American consumer remains indestructibly willing to spend,” as Christian Apelt of Helaba writes. He and Christoph Balz of Commerzbank no longer expect the same strong increase as before, but at least they expect a moderate one. Among other important US data, the focus on industrial production on Tuesday will be. If both data turn out to be stronger than expected, LBBW expert Klumpp expects this to further fuel the current US interest rate scenario of “higher interest rates over a longer period of time.”
In this country, the economic expectations of the ZEW could still change. LBBW and Helaba expect a slight increase following the recent positive surprises in the main indicators of the German and global economy. The expected economic recovery now appears to be consolidating, writes Helaba analyst Stefan Mütze. The recent increase in production, also in the energy-intensive German industry, shows that, despite the difficult economic conditions, it should not be given up.