Stock markets

Inflation rate in Euroland moves further off the ECB target figure

Euroland inflation is receding further. In January the annual rate shows a rise of 1.4%, as against 1.6% in December 2018. The reasons for the downward movement are (as in past months) energy prices, which by comparison with the previous year are now exerting only modest pressure on prices. As a result, doubts are growing whether the ECB will achieve its inflation target of “close, but below 2%”. The hopes of ECB President Mario Draghi have rested of late on the countries that are currently having to contend with an increased lack of skilled labour and rising wage increase levels, above all Germany. There, but also in many other Euroland member states, the momentum on the wage front has at best been at a sound level. The harmonised inflation rate steadied in Germany at 1.7% in January. In other words, at least in coming months, no noteworthy boost to the…

Best start to the year in 30 years

2018 was undoubtedly one of the worst stock exchange years for a long time. The pessimistic sentiment and disappointment about the markets still linger on for many investors. In this lethargy many have overlooked the fact that the markets have staged the best start to the year for 30 years. Since 1 January the S&P 500 has gained 6.9% – the best start since 1989. By way of comparison: The average monthly increase in January is only 0.9%. The DAX also put in a very strong performance in January, also rising 6.9%. Within the past 30 years this performance has only been outstripped by the recovery movement in 2012 and by the share-price fireworks display that was seen around the time when the ECB launched its bond-purchasing programme in 2015. It is now high time to leave the weak performance in 2018 behind us and take an objective look at…

Ifo survey: German companies’ confidence is dwindling

Sentiment among German businesses deteriorated appreciably across the board at the beginning of the year. In January, the ifo business climate index fell lower than at any point in almost three years. Particularly hard hit are corporations’ business expectations, which have truly slumped. Managers were last similarly sceptical of the future prospects back in 2012. Corporate Germany is evidently gradually losing confidence in a solution in the foreseeable future to the political problems that are increasingly placing a drag on the economy. It is once again industry that is worst off, as it is to an ever greater extent suffering the consequences of the trade dispute between the USA and China. The risk of a hard Brexit has likewise become far more threatening of late. The signs of a downturn are also growing in sectors that rely more heavily on the domestic economy. In the wake of these disappointing figures,…

Dividend yields more attractive than ever before

In recent months, share prices have fallen much more sharply than the expected dividend payments. As a consequence, dividend yields have risen noticeable. The DAX and Euro Stoxx 50 are signalling levels of 3.7% and 4.3% respectively, way above the historical levels. At the same time, yields on bond markets have fallen sharply in recent months. The yield premium of DAX dividends over ten-year German government bonds has thus reached a new record high of 3.1 percentage points. Dividends are therefore attractive – both in absolute and relative terms. All in all, the new year started off calmly for stock markets which are recording clear gains. However, nothing has changed in the difficult underlying conditions: the political uncertainties continue to exist in many different forms and sizes. Only the market – after our stock market barometer had plunged deep into negative territory at the end of the year – is…

Euroland sentiment: Germany slightly improves, France loses further ground

This is not what a good start to 2019 looks like. The sentiment barometers provided in the form of the January purchasing manager indices suggest that there has only been a slight dampening in Euroland as a whole and could overall be best described with the words “cautiously confident”. However, a whole series of tangible risks are currently suppressing any possible flickering of the flame of optimism. There is firstly the concern about a “hard Brexit” happening by mistake, then the new EU exhaust emission regulations, the diesel scandal, which has not yet been forgotten, the ongoing smouldering US trade dispute, and the fact that the global economy can be seen to be cooling down. It is therefore not surprising that sentiment has dimmed further in January. The overall index, the so-called composite purchasing manager index, has slipped 0.4 points and is now running at 50.7 points – sentiment thus…

Longer recession could push DAX below 8,000 points

Since 1973 there have been five economic recessions in Germany: 1974/75, 1981/82, 1992/93, 2002/03 and 2008/09. We have analysed the extent to which corporate profits of DAX companies fell during these recessionary phases and share prices came under pressure. This makes it possible to approximately conclude the extent to which a recession on the stock market has been priced in today following a DAX price loss of 25% at its peak between January and December 2018. Approximately, because the structure of the German economy has continuously changed since the 1970s. The composition of the DAX has also constantly changed. Today, the export business of DAX companies is far more important than it was decades ago. Nearly 70% of revenues of the 30 largest German companies are generated in the export business – far more than ten or 20 years ago. At the same time, significantly more is being imported, i.e….

1 2 29