Market Report: Interest Rates Still a Problem

Market Report: Interest Rates Still a Problem

Status: 08/08/2022 22:52

There is not much joy on Wall Street as signs point to another extraordinary rate hike by the US Federal Reserve. Prize winnings have been liquidated.

And they are still brooding, interest rates worry. After a rather carefree start to the week, US stock markets fell to their knees. The main index, the Dow Jones, ended trading with a slight plus of 0.1%.

Nasdaq technology stocks fell 0.4%. Investors failed to shake off fears of a tougher stance from the U.S. Federal Reserve, fueled by Friday’s stronger-than-expected U.S. jobs report. The majority of market participants now assume that monetary policy makers will drastically raise the policy rate by 0.75 percentage points when they meet at the end of September.

On Sunday, a year and a half after President Joe Biden took office, the US Senate passed his multi-billion dollar climate and social package. The package includes around $370 billion for energy security and climate protection and $64 billion for health care.

Market participants are now eagerly awaiting the July consumer price data release on Wednesday. In June, inflation in the United States reached 9.1% – the highest level in more than 40 years.

DAX recovers from Friday’s loss

A positive reading of US data on Friday again topped the German stock market. The strength of the labor market reflects the strength of the US economy, which could perhaps pick up again during the current third quarter. Concerns about a possible stagflation with its negative consequences for corporate profits thus take a back seat.

Either way, investors were more willing to take risk earlier in the week and let the DAX rise 0.8%. The German leading indicator thus reached roughly its starting level on Friday.

Economy update from 08.08.2022

Anne-Catherine Beck, HR, 08/08/2022 09:46

The euro drops below 1.02 dollars

The euro was unable to sustain its interim gains above the $1.02 mark, which should continue to be driven by interest rate expectations in the United States. The economic climate in the Eurozone surprisingly improved somewhat in August. After a sharp drop in July, the economic indicator collected by the consulting firm Sentix rose by 1.2 points to minus 25.2 points. In July, the indicator had fallen to its lowest level for two good years.

Italy on the brink of ‘undesirable status’

In the European government bond market, Italian government bond yields rose initially, bucking the general market trend. The return for a ten-year term has sometimes exceeded the 3.0% mark. Bonds from other eurozone countries were sought after, with yields falling sharply in some cases. German Bunds extended their gains and are yielding just 0.88%.

Market watchers pointed to a negative comment from US ratings agency Moody’s. The agency had set Italy’s credit rating outlook to “negative” on Friday evening. This means that Moody’s can lower the rating, ie the assessment of solvency, compared to the current Baa3. The current rating is only one notch away from the so-called “junk zone” used to denote risky assets. “The risk of a further downgrade to junk increases given the possible political situation after the September 25 elections,” commented bond experts at Dekabank. Italy faces general elections following the resignation of Prime Minister Mario Draghi.

Oil prices rebounded in the evening but remain near their six-month lows since the end of the week. The situation in China in particular plays a major role in the oil market. The strict corona confinements are fueling fears there of an economic slowdown and therefore a drop in demand. In the morning, it was learned that other areas of Hainan Island, popular with vacationers, had been sealed off due to the corona outbreak. On the other hand, the strong export growth of 18% in July surprised the markets. However, China’s imports were up only 2.3% compared to the same period last year and well below forecasts of 3.7%.

Among individual stocks on Wall Street, shares of data analytics firm Palantir stood out with a minus of up to 15.2%. The controversial company, which collects data for the US military and the CIA, says it is unsure whether major government contracts will be renewed. The reach of central orders is “unpredictable”, said chief financial officer David Glazer. The data collector therefore lowered its growth forecast for the full year from around 30% to 23%.

Sartorius bets on biopharmaceuticals

In the evening, Sartorius announced a major takeover. The DAX pharmaceutical and laboratory supplier acquires the British biopharmaceutical manufacturer Albumedix. The purchase price is £415 million. According to Sartorius, Albumedix is ​​a leading provider of recombinant albumin solutions. It is an important element in the production of innovative biopharmaceuticals, especially for cell therapies, viral therapies and vaccines. Albumedix has over 100 employees and is expected to achieve sales of approximately £33 million in 2022. The transaction is subject to regulatory approvals and is expected to close before the end of the third quarter of 2022.

The Bayer descent continues

Bayer stock once again stood out among the few weakest DAX stocks. It was the third consecutive negative day for shares of the Leverkusen-based pharmaceutical and agrochemicals group since quarterly data was released the previous week and a total loss of around ten percent. Above all, the imminent legal risks in the United States in connection with the acquisition of Monsanto continue to have a negative impact.

VW: owner families want more say

The replacement of group boss Herbert Diess changes the balance of power at Volkswagen: the Porsche and Piech families, who run Europe’s largest car manufacturer via Porsche Automobil Holding SE, want to be more involved in decision-making than before, from the start. environment of the supervisory board could be heard.

“They want to take a closer look at the implementation of the strategic directions,” a news agency insider said. Reuters. Future CEO Oliver Blume, the preferred candidate of the Porsche Piech clan, is expected to pay more attention to operational business than his predecessor. Blume is also expected to drive the Diess-initiated shift to a leading mobility service provider in calmer waters.

Porsche SE with multi-billion H1 profit

Due to the uncertainty caused by the war in Ukraine, VW Holding Porsche SE continues to believe that a significant decline and increase in profits is possible this year. The holding company, through which the Porsche and Piech families hold the majority of voting rights in the Wolfsburg automotive group, confirmed its forecast for net profit before tax in a wide range of between 4.1 and 6.1 billion euros. euros. By 2021, Porsche SE had nearly doubled its profit to 4.6 (previous year 2.6) billion euros. In the first six months, the net profit, which is mainly due to the stake in Volkswagen, increased by 31% to 3.2 billion euros. Of this amount, 3.1 billion euros passed from Volkswagen to the holding company.

As part of the IPO planned for the fourth quarter, Porsche Holding intends to acquire 25% plus one share of the ordinary shares of Porsche AG. This would give him a blocking minority.

Siemens Energy in the red

Siemens Energy continues to struggle with losses. For the third quarter of the 2021/22 financial year, the energy technology group reported a post-tax loss of 533 million euros. This was caused by charges related to the restructuring of operations in Russia and further losses at the Spanish wind energy subsidiary Siemens Gamesa. In the same period last year, there was a loss of 307 million euros on the books. For the full year, the group expects a loss that will exceed the level of the previous year by minus 560 million euros, almost equal to the restructuring costs of the Russian activity. Especially in connection with the problems in Russia, special effects would have totaled less 298 million euros in the quarter.

Hypoport confirms its objectives

Financial services provider Hypoport increased its revenue by a fifth to 126 million euros in the second quarter. The surplus increased by 32% to almost ten million euros. Despite the significant rise in mortgage interest rates, the company maintains its annual targets. However, higher interest rates, a looming recession and a lack of material in the construction industry could lead to “longer market cycles for home finance” in the second half.

BioNTech is growing, but below expectations

BioNTech continues to benefit strongly from strong demand for its corona vaccine. In the first half, the company from Mainz achieved a turnover of 9.6 billion euros. Half-year profit amounted to 5.4 billion euros. However, sales and earnings per share in the second quarter were below estimates at 3.2 billion euros and 6.45 euros, respectively. Analysts were expecting an average of 3.96 billion and 7.44 euros per share. For the full year, BioNTech is aiming for a turnover of 13 to 17 billion euros. Preparations for the market launch of two vaccines suitable for new corona variants are in full swing, the company said. Your delivery could start “subject to official approvals” from October.

Strong loss of one billion for Softbank

The crisis in technology stocks has plunged the main Japanese investor Softbank into the red. From April to June, a loss of 3,160 billion yen (equivalent to almost 23 billion euros) was suffered. In the same period last year, there was still a profit of around 5.5 billion euros on the balance sheet. The only Vision Funds, which dominate business activities and which, among others, have stakes in ride-hailing agency Didi, online retailer Coupang, Uber competitor Grab and Alibaba, hit a minus of more than 21 Billions of Euro’s. within three months.

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