market report
U.S. investors relaxed today after an eventful week. However, sentiment on Wall Street remains positive as recession fears are receding.
Wall Street was relatively quiet today after an eventful week. The major U.S. stock indexes hovered near the closing price for an extended period before some selling pressure began to build towards the end of the day. The leading index Dow Jones, which rose 1.2% yesterday, closed down a modest 0.32% at 34,299 points. On a weekly basis, the growth rate was 1.2%.
The Nasdaq and S&P 500 also fell modestly after both hit fresh highs for the year early in the session. Tech shares closed down 0.68%, while the S&P 500 lost 0.37%. All in all, the pitch has calmed down after recent clear moves.
“It’s been a very busy week for investors,” said Chris Zaccarelli, lead investor at Alliance of Independent Advisors. Investors need to digest this information. “
The Federal Reserve signaled further rate hikes on Wednesday, but stock traders saw signs that high inflation was fading and expected just one rate hike in July.
American stock exchanges reacted positively to unexpectedly strong economic data yesterday, including important retail sales figures for May. Despite the Federal Reserve’s (Fed) rate cycle being tight, there is still no sign of a deeper recession – a scenario welcomed by the stock market and perfectly aligned with the Fed’s goals.
However, unlike the DAX, the Dow has yet to make a new all-time high. The index is still not up more than 7%, hitting a record high of 36,942 points.
In addition, there has been a hot new topic on the stock exchange for some time: AI, or artificial intelligence, is increasingly attracting investors to the market, as the use of self-learning programs promises to increase profits, including by reducing costs.
AI fantasy recently turned chipmaker Nvidia into a billion-dollar company. Because of this, Morgan Stanley now picks the stock as its top pick in the U.S. semiconductor sector. Despite the price increase, the newspaper’s valuation has even fallen given the rise in earnings forecasts, the company said. Nvidia shares were initially unable to sustain a strong rally and ended up almost flat.
At Adobe, the AI rally initially continued, with share eventually gaining 0.9 percent. The software provider raised its annual target Thursday night. Many analysts have responded by raising target prices, sometimes significantly. Goldman Sachs analyst Kash Rangan wrote that the fiscal second quarter showed Adobe was one of the biggest beneficiaries of artificial intelligence.
Investors also scooped up German stocks over the weekend, bringing the leading index DAX to a fresh record. The index rose above 16,400 for the first time, hitting a record high of 16,427.
However, the DAX index failed to hold its high and closed at 16,357 points, up 0.41%. This is also a new record based on the closing price. The mid-cap index MDAX closed at 27,480, up 0.55%.
It seems that neither the ongoing interest rate cycle nor gloomy economic forecasts can stop the boom — the steady rise in stock prices. “Bulls feed bulls” is an old stock market adage that governs trading right now.
On a weekly basis, the DAX posted a respectable gain of around 2.5%. “At the moment, greed outweighs fear,” said Thomas Altmann of asset manager QC Partners. “The only concern most people have right now is the fear of missing out on further price increases.”
However, the DAX jumped to new highs on the so-called “witch’s sabbath,” when options and futures on Eurex stocks and indices expire at the same time. This is often accompanied by price volatility as futures market participants try to push prices in the direction they want, especially if they are caught in the wrong foot. So the “moose test” of new highs remains up in the air.
The top performer on the DAX was Rheinmetall, with shares in the arms group and auto supplier up nearly 5%. In an interview with Reuters, company boss Armin Papperger said a framework agreement with Germany worth “billions of euros” would be reached within the next six weeks. Gains spread across all industries. Online retailer Zalando is also popular.
Deutsche Bank is at the bottom of the DAX index. They continued the previous day’s weakness, with prices falling. Traders were referring to a statement from Deutsche Bank Chief Financial Officer James von Moltke the previous day, which further weighed on the move.
At an investor conference, he signaled that volumes in fixed-income securities would fall 15% to 20% quarter-over-quarter in the quarter. The financial institution is the first major European investment bank to warn of a sharp slowdown in trading after some U.S. rivals sent similar signals, according to Bloomberg.
The euro remains well above the $1.09 mark. The euro hit its highest level in more than a month in thin trade, last trading at $1.0939 in the U.S. session. Therefore, the euro exchange rate is roughly at the level of the previous night. The European Central Bank (ECB) set the reference rate at $1.0966 (Thursday: $1.0819).
The euro is currently benefiting from expectations of further interest rate hikes in the currency area. On Thursday, the European Central Bank raised interest rates for the eighth consecutive time. President Christine Lagarde then made it clear that the fight against high inflation was not over. She sees at least one further rate hike at the next meeting in late July.
Bundesbank President Nagel issued a similar statement today, emphasizing that the ECB’s historic phase of rate hikes may not last until autumn. “In my opinion, we have a long way to go,” Nagel said in a speech. “After the summer break, we may have to raise rates further.”
The euro edged lower from mid-afternoon highs after the University of Michigan’s consumer sentiment index was unexpectedly strong. The barometer rose to 63.9 points from 59.2 in May, the university announced in the afternoon’s monthly survey. Economists had only expected a rise to 60.0. Consumers are better at assessing their situation than they were last month and are much more optimistic about the future than they have been recently.
Although inflation has weakened markedly recently, falling to 4.0%, US citizens are bracing for further increases: looking 12 months ahead, they expect inflation in goods and services to be 3.3%. However, in May, the consumer estimate was 4.2%.
Oil prices have turned more aggressive over the course of the year. The price of a barrel (159 liters) of North Sea Brent crude was up around 0.8% in late afternoon.
Oil prices have trended higher over the past few days. More recently, support has come from China, where the central bank eased monetary policy further this week. In doing so, she wanted to help the weakening domestic economy. There was also speculation that the state would provide additional financial aid. China is one of the largest energy consumers in the world.
In other countries, notably the United States, economic worries dominate. That weighed on energy demand and oil prices. However, experts at Commerzbank expect prices to rise soon.
“The oil market is still defying the threat of tension in the second half of the year,” said one commentator. “But that could change in the coming weeks, as strong oil demand in Asia should offset weak demand in the West.” In addition, U.S. oil production is increasingly coming to a standstill.
Volkswagen Group posted sales growth globally in May, brushing off weakness in China at the start of the year. The group delivered a total of 763,800 vehicles last month, up 16 percent from a year ago. Western Europe was the largest market, with sales of 275,200 vehicles, up by a fifth. In China, traditionally the most important individual market, 260,200 vehicles were delivered to customers in May, an increase of 12%.
Airbus announced an order for 70 planes that night. Of these, 60 are for A320 machines and 10 are for A350s, said operations manager Christian Scherer. He did not disclose the name of the buyer.
The orders are in addition to those announced at the Paris Air Show next week. Scherer said the event will show the extent of the recovery in demand: “Business is running like clockwork and the show will prove that.”
Lufthansa made the new offer amid wage conflicts with pilots for the core brand Lufthansa and cargo subsidiary Cargo, according to a group spokesman. Lufthansa did not comment on details. Handelsblatt previously reported that Lufthansa’s offer, together with the previous increase, would result in an 18.5 percent salary increase – spread out to 2025.
Morphosys investors were ecstatic about an upbeat analyst study on a blood cancer drug. The biotech’s thesis rose more than 10% before closing 8% higher. Bank of America JPMorgan has upgraded its title to “overweight” from “underweight” and tripled its price target to 36 euros. Analyst James Gordon pointed his optimism to a drug called pelabresib for a hard-to-treat blood cancer that is expected to have phase III data by the end of the year.
US chip company Intel is expected to receive more government funding for its factory in Magdeburg than originally planned. As reported by Handelsblatt with reference to government circles, 9.9 billion euros should flow instead of the previously promised 6.8 billion euros. Meanwhile, Intel announced plans to build a massive €4.2 billion chip factory in Wroclaw, Poland, where microprocessors will be assembled and tested.
To fund its corporate strategy, Austrian fiber manufacturer Lenzing hopes to raise 400 million euros through a capital increase. Lenzing announced that the former owner could buy 11 new shares for 5 at a price of 33.10 euros each. The subscription period is from June 21 to July 5. Lenzing shares closed at 60.10 euros yesterday on the Vienna Stock Exchange.