The RoboMarkets Weekly Review and Outlook – DAX Finds No Grip – Downward Spiral in Equities and Bonds

Gold is rising towards 2,000 dollars per troy ounce, oil is approaching the 100 dollar mark per barrel – this week the financial markets have priced in the risk potential of the Middle East conflict. While a fortnight ago there was still astonishing stability after the terror of Hamas in Israel, now everything that is associated with risk is being thrown out of the portfolios.

Yield Shock in the US Bond Market

This includes equities, but interestingly also bonds. This is because the crisis has the potential to reignite inflation via rising energy prices and thus prevent the central banks from cutting interest rates, which are eagerly awaited for 2024 and urgently needed for a recession-sensitive global economy. The words of Fed Chairman Powell also fitted into this picture, as he told the markets that interest rates would be paused in November, but that they would continue to rise thereafter.

The bond markets had already done some of the Fed’s work by tightening financing conditions. However, this also means that yields should not come down from this level so quickly and thus not give the stock markets much room to move upwards in the coming months. For the first time since 2007, 30-year bonds went above the sound barrier of five per cent.

DAX Falls Below 15,000 Points

The 15,000 mark and the low from the beginning of October have not held in the DAX. If both marks are not quickly regained, a year-end rally, if it is still worthy of the name, is likely to degenerate at most into a recovery in the then cemented downward trend. As long as the war in the Middle East rages and the danger of intervention by other states cannot be ruled out, investors will not want to burn their fingers with shares.

Tesla Disappoints, Netflix Convinces

Even the two prominent quarterly figures and outlooks from Tesla and Netflix could not really create a good mood among investors. The streaming provider is experiencing a kind of special boom among subscribers thanks to a new subscription policy and the end of the previously tolerated multiple use of accounts, which gave the share itself momentum, but is not really an indication of positive momentum in the entire tech industry.

It was a different story at Tesla, where Elon Musk, who is usually so loud and spoiled for success, was much quieter about the future of his company when he published the figures. Tesla is feeling the restraint of consumers and is struggling to sell its vehicles, even with its profit-destroying discount strategy.

Adidas Jumps Out of the Yeezy Hole

One bright spot for investors and one of the few winners this stock market week was Adidas. In the past quarters, the sporting goods manufacturer had to carry around million-dollar burdens due to the miscalculation with the Yeezy brand. But now the Herzogenaurach-based company surprised with an increase in its annual forecast. The controversial items are slowly being sold out of the warehouses, margins and operating profits rose slightly again in the past quarter.

The issue could thus be over for Adidas sooner than initially thought and shareholders who bought the share at around 100 euros last November did not have the worst feeling. In the current stock market mood, however, it might be difficult to overcome the high for the year at 185 euros in order to continue the upward trend.

Reporting Season Picks Up Speed and the ECB Meets

Geopolitics and monetary policy are overshadowing everything else on the market at the moment. This also applies to the reporting season, which would have a lot to offer in the coming week under different circumstances. Alphabet and Microsoft on Tuesday, IBM, Meta and Deutsche Bank on Wednesday and Amazon, Intel and Volkswagen on Thursday are the highlights. In addition, there are some sentiment barometers in the form of the purchasing managers’ indices from the USA and on

Thursday the European Central Bank will decide on the key interest rates in the eurozone. Although these are not likely to be touched for the first time since July 2002, the central message from Christine Lagarde is also likely to be “higher for longer”.

DAX – Current Supports and Resistances

Supports: 14,850/14,800 + 14,700/14,650 + 14,550/14,500

Resistances: 14,950/15,000 + 15,100/15,150 + 15,200/15,250

This article is from RoboMarkets.