market report
Stocks started the new week cautiously. This is not surprising given the upcoming monetary policy decision.
Even though an upcoming interest rate decision this week is unlikely to bring any major surprises, uncertainty is weighing on investors. After all, the Dow inched up 0.52% in this environment and posted its eleventh straight day of gains, its longest winning streak in nearly six years.
The Federal Reserve will announce its interest rate decision on Wednesday. The European Central Bank (ECB) will follow on Thursday and the Bank of Japan on Friday. The Fed and the European Central Bank are believed to each raise their key interest rates by 0.25 percentage points. As Deka puts it, the question of “what the central bank is signaling in September and beyond” is more important to markets. Most economists currently assume the ECB and Fed will keep all options open at their next meetings.
The rebalancing of the Nasdaq 100, which took effect today, weighed slightly on the overall index. At the close, the technology index rose 0.14%. Because of SEC regulations, index operators have had to reduce the weight of big tech companies in favor of other index values. The share of the “Big Seven”—Apple, Microsoft, Nvidia, Alphabet, Amazon, Tesla, and Meta—has thus dropped from around 56% to around 44%.
The DAX started the new week with a modest gain of 0.1%. Germany’s leading stock index pared early losses for the year. It’s not just uncertainty about the outlook for interest rates that is weighing on markets, but also new warning signs from the economy.
The euro zone’s most reliable leading indicator, the services PMI, fell for the third consecutive month in July. “The level of 51.1 now sends a clear downside signal,” explained Commerzbank economist Christoph Weil.
In Germany, the purchasing managers’ index for the entire private sector — industry and service providers — even fell below the 50-point growth threshold. The negative reading on the barometer was 2.3 points to 48.3 points, not only recording the third straight decline, but also the worst reading in eight months.
The European single currency has fallen against the dollar for the year amid weak economic data. Late at night, the euro was trading at $1.1066 – 0.5% lower than on Friday. Gold prices fell to $1953 in the evening.
Oil prices are on the rise again to start the new week. A barrel (159 liters) of Brent North Sea crude for September delivery was at $82.70 in the evening. That was up 2.5 percent from Friday. Oil prices have risen sharply in recent weeks. The backdrop is mainly supply constraints in major producing countries, notably Saudi Arabia and Russia.
The success of the movie “Barbie” gave Mattel shares a boost in New York. Sales at the top-selling doll maker rose 1.8 percent. Directed by Greta Gerwig, the film grossed $155 million in its U.S. opening weekend. That makes it the most successful theatrical release so far this year.
An electric truck made by US manufacturer Nikola caught fire, sending shares tumbling in New York. A previously damaged vehicle caught fire at Nikola’s Arizona headquarters Sunday afternoon, the company said. Nikola had previously reported a fire near its headquarters last month. The company did not say whether the vehicle that caught fire Sunday was one of the trucks damaged in the June fire.
In the evening, Bayer cut its annual target due to weak agricultural business. The DAX Group only expects currency-adjusted sales of 4.85 to 49.5 billion euros in 2023 and adjusted operating results (Ebitda) of 1.13 to 11.8 billion euros. So far, Bayer has committed 5.1 to 52 billion euros, or 1.25 to 13 billion euros. However, Bayer already admitted in May that only the lower end of these goals can be achieved. Bayer attributed the lower forecast mainly to a “substantial” decline in sales of glyphosate products. As a result, the group may have to write off EUR 2.5 billion. In the second quarter, this will result in a consolidated loss of around 2 billion euros. In 2022, the Leverkusen-based group benefits from sharply higher prices for its herbicide business, as Hurricane Ida creates production bottlenecks in competition and Chinese suppliers are unable to bridge the gap due to the pandemic. However, when competitors returned to the market, prices fell sharply.
Adidas is getting more optimistic after the first sale of its “Yeezy” sneaker stock. The DAX Group announced late that it now assumes a negative operating result of 450 million euros after an initial estimate of 700 million euros. The sporting goods maker now expects to depreciate the remaining “Yeezy” inventory at 400 million euros, 100 million euros less than previously. Adidas is also more confident in sales. Currency-adjusted revenue is likely to decline into the mid-single-digit percentage range, compared to the high-single-digit percentage range initially envisioned. It comes after the Financial Times reported that Adidas had unexpectedly received an order worth more than 508 million euros for Yeezy shoe heights in its first sales collection following the end of its collaboration with controversial rapper Kanye West.
In the first half of the year, auto supplier HELLA saw significant growth in sales, operating performance and profitability. The headlight specialist, which is majority-owned by France’s Faurecia, confirmed this year’s forecast.
Software AG, which last traded on the MDAX and TecDAX due to its acquisition by financial investor Silver Lake, benefited from good business in database software in the second quarter. The announced integrated software future business growth is not so strong.
Vitesco will upgrade to Software AG’s MDAX tomorrow and make room for SDAX for BVB stock returns.
Weak demand from the wind power industry has put a burden on carbon fiber specialist SGL Carbon. The company announced in the afternoon that as of June 30, the assets of the carbon fiber business unit were impaired by 40 million to 50 million euros. However, the slump in demand was compensated in the operating business. First-half sales rose nearly 2 percent to 560.5 million euros. Adjusted Ebitda (earnings before interest, taxes, depreciation, and amortization) remained almost at the previous year’s level at 88 million euros. Therefore, SGL management confirmed the forecast for this year.
RTL Group is expanding its football coverage and has secured further broadcast rights from UEFA, the European football league. Free-to-air TV Nitro will broadcast some of the top Euro qualifiers ahead of the Euro 2020 in Germany. Starting in September, Nitro will air one of the day’s top games on free television.
Shares of engine maker Deutz in the SDAX came under pressure after HSBC downgraded its rating. HSBC analyst Dario Dickmann dropped his buy recommendation because he sees the risk-reward ratio as unattractive.
During the year, Basler’s shares listed on SDAX made up for losses at the beginning of the year. The image processing specialist has slashed its short-to-medium-term forecasts, predicting a loss in 2023, following a drop in sales. As part of the restructuring plan, 200 of the more than 1,000 jobs will be cut.
Online broker Flatex Degiro is confident about the second half after releasing key figures. The company announced after the trading day that it expects a further substantial improvement in margins in the second half of the year. Management confirmed its forecast for this year. Accordingly, adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) for the full year should be above 40%. This ratio was 37.4% in the second quarter of last year. In the second quarter, SDAX’s online brokerage benefited from rising interest rates. Adjusted Ebitda reached EUR 33.9 million, an increase of more than 24%.
Europeans’ thirst for travel has boosted budget airline Ryanair’s profits over the past quarter. In the first quarter ended June, the surplus was 663 million euros. A year ago, shortly after the beginning of Russia’s war of aggression in Ukraine, the company’s profit was only about 188 million euros.
Under its owner Elon Musk, Twitter said goodbye to the bluebird and introduced an “X” as its logo. Musk announced the global change in a series of tweets on Sunday. After acquiring the messaging service for about $44 billion last October, the tech entrepreneur declared the acquisition of Twitter an “accelerator to create X, the universal app.”