The RoboMarkets Weekly Review and Outlook – DAX heads for 16,000 – Reporting season starts in the USA

Jürgen Molnar, Capital Market Strategist RoboMarkets

14 April 2023

A stronger than expected decline in the overall rate was offset by an increase in the core rate, which is more important for the Fed. An increase of 25 basis points at the meeting at the beginning of May is thus not off the table and an end to the current rate hike cycle remains open.

Also because the labour market in the US still shows no signs of weakness. After a series of disappointing economic data, investors had hoped that the restrictive monetary policy in March had finally left its mark on the labour market. But that was not the case; a further decline in the unemployment rate and slightly higher wage growth initially caused long faces on Wall Street after the long Easter weekend.

The Future Is Called Interest Rate Cuts

All in all, however, optimism prevailed and investors rewarded the positive aspects of the figures and, as always, traded the future, which in their eyes already holds interest rate cuts in store for the second half of the year. Thus, the DAX also managed to break out to a new high for the year above 15,800 points. Now the question is whether the willingness to take profits after strong price gains will remain high because investors do not yet have a clear picture of future economic and, above all, monetary policy developments.

If so, the last 500 points to the all-time high are likely to be much harder for the DAX than the 4,000 points since October last year. Or else scepticism about the current rally will drive the pessimists further ahead and the DAX quickly to 16,000 and above. Seasonality argues for the latter, before May could then once again live up to its reputation as a selling month.

US Bank Balance Sheets Can More Than Convince

The reporting season, which traditionally starts with the big banks in the USA on Friday, is also likely to have a decisive say in this question. After the recent bank quake in the USA as well as in Europe, the question was how the financial stability and earning power of the banks was. And the three big ones were indeed convincing, the JP Morgan share even switched to rally mode. So, from the point of view of the stock market, there is no disturbing fire for the time being. Next Tuesday, Goldman Sachs and Bank of America will follow from the sector.

Netflix, IBM and Tesla Report

Investors will also focus on the technology sector on Tuesday. Netflix will start the round of figures, followed by IBM and Tesla on Wednesday. The e-car pioneer already published its first figures at the beginning of the month and missed analysts’ expectations in the first quarter – despite significant price cuts of up to 20 per cent. Tesla is thus also far from the annual sales growth of 50 per cent that CEO Musk has set out. For that to happen, the carmaker would have to step up a gear in the coming quarters or distance itself from this goal again. We will know more on Wednesday. Hopefully, at the end of the coming week, some purchasing managers’ indices from the eurozone will provide a little more clarity about the mood in the eurozone economy.

Gold Gets a Taste of New Highs

Gold is currently flying high. The precious metal, which is considered a safe haven, is trading at a new high for the year and thus only just below its all-time high of 2,060 US dollars per troy ounce. This year alone, the price of gold has risen by twelve percent. In addition to continued high inflation and geopolitical uncertainties, the US dollar is weakening again and interest rates on the bond market are falling. This mixture of factors could catapult the precious metal to new heights in the coming weeks.

DAX – Current Supports and Resistances

Supports: 15,650/15,600 + 15,500/15,450 + 15,350/15,300

Resistances: 15,750/15,800 + 15,950/16,000 + 16,200/16,250

This article is from RoboMarkets.