The RoboMarkets Weekly Review and Outlook – DAX Could Break Summer Break – Nasdaq Roulette and Interest Rate Decisions Ahead

Jürgen Molnar, Capital Market Strategist RoboMarkets

21 July 2023

For one thing, on Monday the weightings in the Nasdaq 100 Index will be shifted in favour of the small and at the expense of the large. Even if only slightly, this could nevertheless lead to some shifts in the funds, which will then leave their mark on the overall market. Apple, Amazon, Alphabet, Microsoft, Meta, Nvidia and Tesla currently account for 55 percent of the index, and the seven big players will probably have to give up between ten and 15 percent of this share. The advantage for the small players is that they are attracting more attention from investors.

And Once Again the Interest Rate Screw is Turned

On Wednesday and Thursday, the focus will once again be on the central banks. It is a foregone conclusion that both the Federal Reserve and the European Central Bank will once again raise interest rates. Particular attention will be paid to the US Federal Reserve, as it is likely to raise key interest rates to 5.5 per cent with this move, while inflation fell to three per cent in June. What at first glance looks like a mistake, and perhaps could be one in terms of monetary policy, can only be explained by the still high core inflation of 4.8 per cent. How Fed chief Powell will explain himself and whether the July rate hike will be the last in this cycle, we will know more on Wednesday evening.

Substance is in Demand Again

In the run-up to these decisions, not much happened on the DAX this week. Against the backdrop of the small sell-off in US tech stocks after the figures from Tesla and Netflix, however, this was definitely a positive development. As an alternative, investors seem to have turned to companies with substance in the Dow Jones and also in the DAX. The market thus remains trapped in its sideways range between 16,000 and 16,200 points for the time being, and in Frankfurt the wait for new impulses continues.

Falling Margins Weigh on Tesla

At first glance, the figures of the e-car manufacturer Tesla looked very good indeed. An 80 percent increase in the delivery rate and a 50 percent increase in sales should convince any sceptic. Even the profit rose by 20 percent despite all the discounts. The worries that Tesla cannot win the price war on the car market, which it has largely instigated itself, are still unfounded. Nevertheless, the share lost about ten per cent. If Tesla does not get a grip on rising costs, the next price cuts are likely to put even more pressure on margins than they already do. And the ageing product range is doing the rest and threatens to become a shelf warmer against the increasingly strong competition without discounts.

Netflix Fights Against Free Riders

At Netflix, the strong increase in user numbers was initially the most convincing factor; the streaming service now has almost six million more subscribers. The main reason was the measure to prevent the password from being passed on. As a result, freeloaders now have to create their own accounts. Although the numbers are pointing in the right direction and the move has worked, it may only be short-term and, above all, not good enough. In earlier estimates, Netflix spoke of around 100 million so-called third-party users. So as of now, the yield of only six per cent is only a start. Investors are not so sure whether the trend will continue, and for the time being they have given a thumbs down to the shares, which have been running strongly in recent months.

Glimmer of Hope for the Real Estate Market

There was good news from the real estate market this week, here business had almost come to a complete standstill due to the rise in interest rates. Although property prices have not fallen as quickly as interest rates have risen, turnover in the sector has collapsed significantly. An announcement by Hypoport, a real estate loan broker, now shows that demand for loans is picking up again. Although it is still too early to speak of a significant recovery, a stabilisation of the market can be seen. This could mean that time is running out for those who recently speculated on prices falling further, and from this side also bring some momentum into the market.

DAX – Current Supports and Resistances

Supports: 16,050/16,000 + 15,900/15,850 + 15,750/15,700

Resistances: 16,200/16,250 + 16,400/16,450 + 16,550/16,600

This article is from RoboMarkets.