Stock markets

Money market in the USA dries up, US Federal Reserve now steers against it

The liquidity problems on the US money market have existed for some time and have steadily intensified in recent months. In mid-September, the US Federal Reserve pumped liquidity back into the money market for the first time in more than a decade. The measure became necessary after the effective funds rate (EFFR), i.e. the interest rate at which banks lend money to each other, had risen significantly. The trigger for this escalation was a chain of events – such as the quarterly payments of corporate tax or the payments for new T-Bill issues by the banks – which all contributed to a further shortage of already tight liquidity. As a result, the US overnight repo rate rose sharply (intraday: 10%!). The Fed had to intervene with several injections of liquidity totalling around USD 75 billion, causing money market rates to fall again. After that, it was actually clear that the…

Monetary policy overshadows weak corporate data

Geopolitical uncertainties and the effects of the trade conflict between the USA and China are causing a cooling of world trade, which especially the export-dependent industrial companies in Germany cannot escape. In the reporting season for the second quarter, domestic companies have revised their annual plans for 2019 by the dozen. Following the decline in 2018, DAX companies are threatened with a drop in profits for the second year in succession. This is not reflected on the stock markets. DAX & Co are close to their annual highs. The fact that the market is still reacting to the known negative factors was last observed in mid-August. The mixture of hardened rhetoric against China, the prospect of a No-Deal Brexit and a government crisis in Italy actually caused the DAX to fall to our target of 11,500 points postulated for the end of the year. However, it was not significantly stronger…

Purchasing managers‘ indices in the euro zone: Bad mood in September

According to the September survey, the comprehensive composite purchasing managers‘ index for the euro zone lost 1.5 points and at 50.4 points (75-month low) is only slightly above the growth threshold of 50 index points. The decisive factor was a significant decline in demand from service providers and industry. In particular, the downturn in industry has accelerated again, and it seems to be increasingly the case that the previously robust services sector is being pulled down as well. According to IHS Markit, sentiment barometers in the entire currency area have been lower than they have been since 2013. The German economy, and German industry in particular, appears to be increasingly at the centre of economic weakness. And according to business expectations, there is no turn for the better in sight. At the end of the third quarter, the growth prospects for the euro zone are clouding over on the basis…

ECB pushes investors out of the market

Bond purchase programmes by central banks represent massive market interventions that have a lasting effect on supply and demand. The ECB’s first QE programme, which was launched in spring 2015, also had a noticeable impact on EMU’s capital account. In 2014, foreign investors had bought EUR 114 billion in EMU bonds. In 2015, however, this sum was reduced to EUR 30 billion. In the following three years, the situation turned around and foreign investors sold an impressive EUR 470 billion in EMU bonds. Domestic investors also did not remain unaffected by the massive intervention of the ECB: they fled en masse into foreign bonds and shares (EUR 1,500 billion in 2015-2018). With the end of the programme in December 2018, however, the tide turned again. In the first seven months of this year, purchases of EMU bonds from abroad amounted to an impressive EUR 213 billion. French, Italian and German…

Hope – once again

The last few days have brought a slight easing in the situation with regard to the greatest political risks for the global economy. In the UK, the immediate threat of a no deal brexit on 31.10.2019 seems to have been averted for the time being. In Italy, a cooperation between the Social Democrats and the 5-star movement was agreed, ruling out the possibility of rapid new elections and a possible march-through of Salvini’s Lega for the time being. And finally, the USA and China will at least again agree on meeting dates, which is also a step forward in view of the disagreement of the last few weeks. These developments have already been received with great relief on the financial markets. Yields on German government bonds have recovered somewhat from their low, and prices on the stock markets have also risen. Italian government bonds also benefited significantly. However, the relief…

You shouldn’t go by speedboat

The dispute between „value“ and „growth“ followers is almost as old as the stock market itself, although these are not per se contrary investment styles. The value of a company is created by growth. Value stocks are regarded as boring thick ships with little growth and low valuation, growth stocks as speedboats characterised by high profit growth. What is value, what is growth, as defined by the relevant index providers? – They make it easy for themselves and usually only look at the ratio of a company’s price to book value (KBV). This indicates how the current market value of a company is quoted in relation to the equity value shown in the balance sheet. In most cases, the index providers „book“ the more expensive half of all shares in the index according to KBV in the „Growth“ index and the other half in the „Value“ index. In our view,…

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