MARKET OUTLOOK / Between strong companies and weak growth | news

From Herbert Rude

FRANKFURT (Dow Jones) – After the end of the recent recovery wave, the course on the German stock market has now been set aside. The picture of an inconsistent and mixed market is likely to become more solid. It is true that the reporting season has provided positive impetus, but so far European companies have even exceeded their already high expectations. On the other hand, the high energy prices will probably soon leave their mark on consumption, because the bills at the petrol stations or the gas suppliers act like tax increases.

Added to this are the supply chain problems, which, in addition to high energy prices, are burdening growth and driving up inflation rates. They are mainly due to the pandemic, because in many Asian economic centers, Covid-19 outbreaks quickly lead to lockdowns that slow down both production and exports via the ports.

The high export dependency of German companies, especially on the sluggish Chinese economy, has ensured that the DAX, unlike the US indices and the Stoxx-600, has not reached or even exceeded the previous record levels. There are also no signs of a run-up to the 16,000 mark in the near future. It’s still too early for the classic year-end rally. In addition, the DAX is currently lacking the driving force for another round of the rally. Defensive growth is in demand in Europe, as Nestle, Pernod-Ricard and Essilorluxottica have recently set new all-time highs. In the DAX heavyweights, however, the area is only represented by Linde.

On the other hand, the entire consolidation of the past few months is still technically positive. This is retained if the lower edge is not permanently undercut at 14,800.

The US Federal Reserve is likely to initiate tapering

The number one highlight of the coming week is expected to be the meeting of the US Federal Reserve with the interest rate decision on Wednesday. According to observers, because of the weaker growth in the US recently, it will not add any oil to the fire and fuel the discussion about rapid rate hikes. However, she should cut back her securities purchases, according to previous indications, presumably by 15 billion dollars a month.

The US labor market report for October will be published next Friday. According to economists, job creation should have accelerated again to around 400,000 new jobs outside of agriculture. The hourly wages, on the other hand, are likely to have increased more slowly than last, only by 0.4 percent after 0.6 percent.

New data on the purchasing manager indices will be in view as early as Monday. The Caixin index for the manufacturing sector in China is feared to fall below the 50 mark. This separates growth from shrinkage. In the end the caixin had been right on the threshold.

In Germany, a slight recovery in incoming orders is expected after the August slump of 7.7 percent.

After weaknesses – FMC and Fresenius publish figures

On the corporate side, the reporting season is still in full swing. Among other things, the business figures of Fresenius and FMC are in view. A market participant justifies the recent weaknesses in the courses with the changed dialysis market. During the pandemic, it became clear that dialysis could also be carried out at home, and that much more cheaply.

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(END) Dow Jones Newswires

October 29, 2021 06:25 ET (10:25 GMT)