market report
German stocks have yet to find a clear direction. In the afternoon, Germany’s DAX rose as Wall Street rallied, while the value of the second line fell.
Germany’s DAX quickly pared early losses and is now tracking gains from the leading U.S. index, the Dow Jones. It is currently at an intraday high of about 0.6% at 16,200. Compared with yesterday, the values in the second row are weakening, so the market as a whole has no clear direction in the afternoon.
The decisive factor now is the progress of the corporate earnings season, which has already seen its first bright spots in the US, with banks reporting mostly better-than-expected results. The same was true the previous night for the business IDs of Tesla and Netflix, two technology stocks, which were not easy to read.
However, investor sentiment towards both outcomes has become increasingly negative, weighing on the market as a whole. Specifically, Tesla’s profitability continued to decline in the second quarter, while Netflix’s surprisingly large influx of customers wasn’t reflected in the streaming service’s balance sheet as expected.
“Stocks have been doing really well lately as economic data has been more encouraging and banks have opened the earnings season on a positive note. Maybe that’s keeping expectations a little too high, leading to some profit-taking when looking at the end of the week,” said the Orlando broker Craig Elam commented.
After XETRA closed in the evening, the domestic software giant SAP announced the data of the German DAX index, which accelerated the hot stage of the German quarterly report. According to the market, earnings season can now determine whether the DAX rises or falls.
The chip industry stood out today: Taiwanese industry leader TSMC’s profit fell for the first time in four years, clouding sentiment. Infineon was down nearly 2 percent in the DAX, with Aixtron and Elmos Semiconductor also facing more pressure in the MDAX and SDAX. Regardless, chip values have been weak lately, according to one trader. Falling profits at TSMC may not help that.
On the other hand, German investors in Wiesbaden have received good news today: Price increases at the manufacturer level in the country continue to weaken. Producer prices rose 0.1% year-on-year in June, according to the Federal Statistical Office. It was the slowest increase in two and a half years. Producer prices reflect price pressures at the producer level. The development also has implications for consumer prices, which are the basis of the European Central Bank’s (ECB) monetary policy.
The European Central Bank is still likely to raise interest rates again in the coming week despite easing price pressures, a Reuters poll showed. All 75 economists expected the deposit rate to rise by a quarter percentage point for the ninth straight time, to 3.75%. The rate that banks receive from the central bank to park excess funds is considered the relevant rate in the euro area.
Opening prices on the Nasdaq technology exchange in New York fell about half a percent, extending losses for the year, though the standard value was unchanged. Bad news from the chip industry, as well as massive losses from Tesla and Netflix, have weighed on prices.
The leading index, the Dow Jones Industrial Average, rose about 0.6% the previous day after breaking above 35,000 for the first time since April 2022, and touched a session high of 35,288, up from yesterday’s high of 35,234. Among defaulting stocks, there are some that have reported better quarters.
For example, pharmaceutical and consumer products group Johnson & Johnson. The latter again raised its forecast for the year after an unexpectedly strong second quarter. The company mainly benefited from a strong medical technology business in the April-June period. But as the group announced today in New Brunswick, the soon-to-be-divested consumer business and pharmaceuticals unit also grew.
The group had raised the bar in April after a strong start to the year. Adjusted EPS (adjusted earnings per share), largely considered by industry experts, rose 8% to $2.80, the information showed. Management is now more optimistic about this key figure for the full year.
The bottom line is that earnings rose nearly 7% to $5.1 billion. Investors are buying the heavyweight from the Dow. The stock was up nearly 4% in early trade. With a market capitalization of about $430 billion, Johnson & Johnson is one of the most valuable stocks outside of the tech industry.
The central bank’s key interest rate decision due this month is taking a backseat for now given the latest flood of data. However, they remain crucial to the market. While many market participants believe interest rates have peaked, at least in the U.S., the picture is less clear in Europe. The deciding factor, however, will be expectations of when interest rates start to fall, ie when inflation calms down again. Can’t talk about that yet.
Economists polled by Reuters expect U.S. interest rates to rise by a quarter of a percentage point next Wednesday to a new range of 5.25 percent to 5.50 percent. A further rate hike by the European Central Bank to 3.75% is also considered a foregone conclusion.
The euro tends to weaken again in the afternoon and is currently trading at $1.1184, below the $1.12 mark.
The dollar was boosted by weekly U.S. jobless claims. Because these recent results were lower than expected. The Washington Labor Department said in the afternoon that 228,000 people applied for state aid last week. Economists polled had expected 242,000.
The value of 270,000 initial filings is considered critical as the continued slowdown in the labor market becomes apparent from this point on. So far, however, the process has continued smoothly despite Fed rate hikes to combat high inflation.
Oil prices rose in the afternoon. The price of a barrel (159 liters) of North Sea Brent crude rose about 0.8%, while the price of a barrel of U.S. West Texas Intermediate (WTI) crude rose by the same amount.
The race to succeed BASF boss Martin Brudermüller may be decided internally, according to media reports. The Financial Times reported that Markus Kamieth, who is the head of the chemical company’s China operations, went ahead, referring to people familiar with the matter. Kamis should also be the favorite for Brudermüller, who will move to Mercedes-Benz in May for the vacant chief job. BASF declined to comment when asked by this newspaper, citing the decision-making power of the supervisory board to fill the top job.
The European Commission has approved multibillion-dollar aid from Germany to Thyssenkrupp. The announcement was made today by the European Commission in Brussels. A major factory to produce climate-friendly steel will receive up to 2 billion euros in funding.
US technology investor Silver Lake has acquired a majority stake in Software AG. As he announced today, the investor held 84.29 percent of Darmstadt as of July 17. The deal still needs approval from authorities. Silver Lake hopes to complete the acquisition in the fourth quarter. The investor reconfirms that he does not want to enter into any transfer of dominion and/or profit and loss agreement. However, Software AG, which is listed on MDAX, will be delisted from the stock exchange as soon as possible.
The high cost of batteries also gave Swedish carmaker Volvo Cars a boost in second-quarter profit margins. The Swedes are also expecting an improved second half, with Volvo announcing price increases today. Volvo will benefit from lower procurement costs through the second half of 2023, Volvo said. Volvo Cars plans to sell only electric cars by 2030.
In the second quarter, 178,800 cars were sold in Sweden, a quarter more than in the same period last year. In contrast, sales rose by 43 percent to SEK 102.2 billion (EUR 8.9 billion). Adjusted earnings before interest and taxes (EBIT) fell to 6.3 percent from 6.5 percent in the second quarter. The bottom line was that profits fell by almost two-thirds to 3.5 billion crowns.
The desire to travel post-coronavirus has given British budget airline Easyjet confidence. The airline announced today that its board expects a record pre-tax profit for the fourth quarter (July-September). In addition to the return of the desire to travel, lower costs and more stable oil prices are also helping. In the third quarter, Easyjet reported pre-tax profit of £203m, down from £114m a year earlier. Sales jumped 30% to £1.5bn.
Weak demand for chips led to TSMC’s first profit decline in four years. The world’s largest semiconductor maker announced today that last quarter’s earnings fell sharply by 23.3% to 5.22 billion euros. As expected, sales fell 13.7% to 14.99 billion euros. Apple suppliers reported revenues of 1.490 to 15.61 billion euros for the quarter.
Telecom provider Nokia also had to grapple with falling profits in the second quarter after a sluggish start to the year. On top of that, the weak network business is causing problems for the Finns. As Nokia announced today, the group’s revenue from April to June was 289 million euros, 37 percent less than in the same period last year. Sales in the previous quarter were 5.7 billion euros, down 3 percent from a year earlier, while operating profit fell 16 percent to 474 million euros. Chief executive Pekka Lundmark sees the current period of weakness as a short-term phenomenon.