The RoboMarkets Weekly Review and Outlook – DAX Between Bear and Bull Trap

Jürgen Molnar, Capital Market Strategist RoboMarkets

March 10, 2023

While the DAX was able to decouple itself from a falling Wall Street in the first half of the week, as it had so often before, by Friday morning at the latest, before the US labour market data and after the price plunge of a start-up financier from Silicon Valley, the composure in Frankfurt was over. The pull from New York was too great for investors in this country to ignore.

Because on both sides of the Atlantic, even after the two hearings of US Federal Reserve Chairman Powell, people were not really any wiser about how far and how fast key interest rates will rise in the USA in the coming months. And if, on top of that, share prices fall, as they did at the end of the week itself, when bond market yields come back, extreme caution is called for. It could be that many investors now pull the plug on the stock market and choose the attractive alternative of high interest rates in the bond market.

US Labour Market Again Creates More Jobs Than Expected

At 2:30 p.m., the eagerly awaited US labour market data were published. After more than 500,000 new jobs were created in January, 311,000 jobs were created in February, significantly fewer than in the previous month. But firstly, it was more than expected and secondly, too much to signal to the Federal Reserve that the danger of a wage-price spiral has been averted.

After the many data showing a still robust US economy, fears of a renewed acceleration of the interest rate hike cycle to 50 basis points are now circulating. On the other hand, the significant rise in interest rate expectations in recent weeks also offers plenty of potential for easing, should the US Federal Reserve not allow itself to be ruffled and diverted from its course at its next meeting on 22 March.

Adidas With More Problems Than Solutions

The Adidas share was also in focus this week. The sporting goods manufacturer is cutting its dividend by almost 80 percent. The main reason for this is the ongoing problems in China, both the production country of a large part of the products and the largest sales market of the sporting goods manufacturer.

And then the break-up with rapper Kanye West has left a significant hole in the balance sheet. The products from the Yeezy collection alone, which are currently no longer being sold, will be written off by 500 million euros if no other use is found for them. So things are not looking good for the share, and for investors there is currently very little to be said for a long-term commitment.

SAP With Attractive Offer

SAP has received an attractive offer for its subsidiary Qualtrics. The US investment company Silver Lake wants to pay 18.15 US dollars per share. This values the company at 12.4 billion dollars. This means that SAP would receive about 8.8 billion dollars for the 71 percent share, which is 800 million euros more than the Walldorf-based company paid for it four years ago. Never having really taken off and arrived in the SAP Group, the separation also offers shareholders the advantage, beyond the short-term gain, that SAP can and will now concentrate fully on its core business and on tapping the growth potential in the cloud.

US Inflation Data on Tuesday

The DAX, which was still sniffing the air above the 15,700 mark on Tuesday, had to interrupt its journey towards an all-time high. This means that there is now danger from a chart perspective. This is because a double top has formed, which in the best case only acts as resistance on the way up and allows the market to remain in front of it.

owever, it is also possible that the journey down from here will soon turn into a stronger correction. The decision on this could come as early as next week, when the US inflation data for February are published on Tuesday. A slight decline is expected in both the overall and core rates. The figures are also the last big data set in the Fed’s collection for its meeting the following week.

DAX – Current Supports and Resistances

Supports: 15,300/15,250 + 15,200/15,150 + 15,050/15,000

Resistances: 15,550/15,600 + 15,700/15,750 + 15,800/15,850

This article is from RoboMarkets