Midday Market Report
Hostile buyouts surging forward
The German Dax remained relatively motionless on Wednesday, awaiting the US inflation data later in the afternoon. Thursday will bring the European Central Bank's interest rate decision, with the US Federal Reserve set to make its final rate decision for the year next week. Investors are preferring to remain on the sidelines following the recent rally.
At midday, the Dax stood steady, dropping 0.01% to 20,328 points. Despite the year-end rally stalling since the beginning of the week, the record high of over 20,460 points still lurks nearby.
Seoul's Recovery
The MDax dipped 0.1% to 26,819 points at midday, with only minor movements across Europe. Wall Street indices have recently corrected more significantly from their record levels. Asian markets remained relatively quiet on Wednesday, with the exception of Seoul, where recovery in prices persisted after reaching their yearly lows during the political crisis.
"The US inflation data looms as the last major hurdle for another rate cut by the Fed this Wednesday," commented portfolio manager Thomas Altmann of QC Partners. "A negative surprise could prompt the Fed to reconsider and slow down rate expectations for next year," he cautions. "An overall rate increase to 2.7% is anticipated, while the core rate is expected to remain stable at 3.3%," explains capital market strategist Jürgen Molnar of RoboMarkets.
Zalando's Takeover Offer
Notable among Dax individual stocks, Zalando stood out with a takeover offer. The online retailer proposed 6.50 euros per About You share and has secured nearly three-quarters of the company's share capital through binding agreements with key shareholders. Profit-taking pushed Zalando's shares down by up to 9.2% at times, while About You soared around 65% to 6.43 euros.
Siemens Energy Struggles
Siemens Energy was weak in the Dax, falling 1.7%. DZ Bank downgraded the shares to "Sell," viewing the new medium-term targets as "overpriced." Siemens Energy has been the best performer in the Dax this year, with its share price quadrupling since the beginning of the year.
Carl Zeiss Meditec's Stumble
In the MDax, Carl Zeiss Meditec's shares fell by 10.6% to their lowest level since April 2018 following a cautious outlook. J.P. Morgan reported that the company's reported operating result for the fourth quarter was 50% below average analyst estimates. Tui also failed to impress with its final figures and affirmed medium-term targets. Its shares dropped 4.1%.
Talanx's Growth Prospects
Talanx, the insurance company, aims to increase profits and continuously raise dividends for shareholders in the coming years. This strategy was well received, causing the company's shares to rise by 2.4%. Bilfinger surged even more, gaining 5.3% and leading the MDax after announcing a share buyback program on Tuesday.
Shifts in the SDax
On the SDax, Kontron's shares reached the index's peak, surging 5.1% following a significant U.S. order. Meanwhile, Alzchem lost 2.7%, and Metro plummeted 4.7%. Two major Alzchem shareholders sold a total of 250,000 shares in a private placement. Metro was disappointed with weak results for the past fiscal year and an uninspiring outlook.
Inditex Slips in Madrid
In Madrid, shares of Inditex, Zara's parent company, fell by over 5% after missing market expectations for sales and profits in the quarter. Analysts linked the results to currency fluctuations due to a stronger U.S. dollar, as Inditex generates most of its revenue in euros.
Rising Oil Prices
Oil prices climbed on the commodities market, boosted by speculation about economic stimulus measures in China. North Sea Brent crude and U.S. WTI light crude each rose 0.8% to $72.76 and $69.19 per barrel, respectively. In light of ongoing economic weakness, a "suitably accommodative" monetary policy will be pursued in the coming year, according to Chinese state media, citing a Politburo meeting.
Enrichment Insights
- US Inflation Data: Lower-than-anticipated inflation could result in delayed rate hikes or even discussions about rate cuts, potentially supporting economic growth and stock markets, as it lowers borrowing costs. Conversely, higher inflation could lead to higher interest rates, potentially dampening growth and impacting stock market performance.
- ECB Interest Rate Decision: A decision to raise interest rates could increase borrowing costs, potentially adversely affecting stock markets, particularly for companies with high debt levels. Conversely, keeping or lowering rates could support economic growth and boost stock prices. The ECB's decision will shape expectations for future interest rate moves, impacting bond yields and the attractiveness of stocks relative to bonds.
- Stock Market Volatility: The combination of US inflation data and ECB interest rate decisions may trigger stock market volatility, as investors carefully watch these announcements to gauge future economic and monetary policy directions.
- Portfolio manager Thomas Altmann of QC Partners warned that a negative surprise in the upcoming US inflation data could prompt the Federal Reserve to reconsider and slow down rate expectations for next year, potentially leading to increased stock market volatility.
- In the technology sector, Kontron's shares reached the SDax's peak after a significant U.S. order, indicating a positive impact of business with American companies on the European tech market.
- The European Central Bank's interest rate decision on Thursday and the US Federal Reserve's rate decision next week will have a significant influence on the finance and investing landscape, as changes in interest rates can affect borrowing costs and, consequently, business and investing decisions in the general-news context.
