Market volatility continues as the DAX opens significantly lower, dropping 1.2% to around 23,140 points after a record rally. Investors are cashing in profits amid uncertainty, influenced by upcoming US job data. Concerns grow over a steep decline in German industry orders, while optimism surrounds a proposed financing package for military and infrastructure. Global markets reflect caution, with declines in Asia and fluctuating euro values. Meanwhile, corporate news includes Zalando’s acquisition plans and positive forecasts from Broadcom.
The DAX’s Ups and Downs
The thrilling market fluctuations persist as the DAX opens today with notable losses. Investors appear to be cashing in their profits amidst a backdrop of uncertainty. The trajectory of the index will be influenced by the latest job data from the US.
In early trading, the DAX has dipped by 1.2 percent, hovering around 23,140 points. This follows a record-setting rally where the German benchmark index reached an impressive high of 23,475 points just yesterday, ultimately closing at 23,419.48 points with a 1.5 percent gain.
There is a growing trend among investors to take profits off the table.
Industry Orders and Job Market Insights
Recent days have seen upward momentum in prices driven by a proposed financing package aimed at military and infrastructure improvements. Many investors and economists are optimistic about the potential benefits for the faltering economy.
Robert Greil, the chief strategist at Merck Finck, notes a shift in governmental attitudes towards debt as a means to foster growth. He remarks, “More and more states are willing to take on greater debt, which could stimulate economic advancement. Following the US trend, political decisions are increasingly impacting the financial markets in Europe, leading to heightened volatility.”
However, caution is advised by industry experts. Jochen Stanzl, chief analyst at broker CMC Markets, observes, “In the DAX, the inclination to secure profits is rising. Upward breakouts are no longer prompting follow-up purchases, but rather are being utilized as opportunities to cash out.” This sentiment echoes the patterns seen earlier in the week.
Adding to the concerns, the German industry is facing a significant decline in orders, marking the steepest drop in a year. According to the Federal Statistical Office, orders plummeted by 7.0 percent in January compared to December, starkly contrasting the previous month’s growth of 5.9 percent.
Jens-Oliver Niklasch, an economist at LBBW, describes the start of the year as “disappointing.” He highlights the distortion in data due to large orders and emphasizes the challenges in finding positive indicators amidst this downturn.
As the trading day progresses, all eyes are on the US labor market report. The strength of the job market is crucial for the US Federal Reserve’s monetary policy. A robust labor market could diminish the likelihood of interest rate cuts, suggesting that the economy remains resilient.
Experts from Helaba indicate that while employment figures are expected to rise, it remains uncertain whether they will meet or exceed consensus estimates. They suggest that expectations for potential Fed rate cuts might be supported, depending on wage growth trends.
Market observer Thomas Altmann of QC Partners emphasizes the significance of wage increases, warning that rapid wage growth could delay any further rate cuts from the Fed.
Global Market Reactions
In the tech realm, the Nasdaq has confirmed a corrective phase since its peak in December. Market analyst Tony Sycamore of IG expresses a lack of confidence in investing amidst overwhelming uncertainties, labeling the current environment as challenging for investors.
Japanese stock markets also experienced a downturn, with the Nikkei 225 falling by 2.2 percent to close at 36,887 points. The S&P/ASX 200 in Australia declined by 1.8 percent to 7,948 points. According to market expert Andreas Lipkow, Asian market participants are growing increasingly anxious as they take profits ahead of the weekend, particularly with the impending US labor report.
Meanwhile, Chinese markets fared slightly better, with the Hang Seng Index dipping by 0.7 percent to 24,194 points and the CSI 300 losing 0.3 percent to 3,944 points. China’s foreign trade data reveals a cautious start to the year, with exports rising by 2.3 percent while imports saw a decline of 8.4 percent, both figures falling short of analysts’ expectations.
On a brighter note, the euro has rebounded above the 1.08 US dollar threshold. This increase coincides with the German Union and SPD’s agreement to authorize billions in loans for defense and infrastructure, easing certain fiscal constraints. Since the announcement, the euro’s value has surged by over three cents, although a stronger euro can negatively impact export-driven economies due to increased costs for goods outside the eurozone.
In defense news, Airbus’s defense chief, Michael Schöllhorn, welcomed the proposed funding for defense but cautioned against reliance on US armament purchases. He argues that continued dependence on external suppliers could be problematic, referencing the challenges faced by Denmark with its American F-35 aircraft.
In corporate news, Zalando is making strides in its acquisition of About You, announcing plans to forcibly compensate remaining shareholders. The company revealed it now holds over 90 percent of About You’s share capital, with the final results of the takeover bid expected on March 11.
Finally, investors in the crypto market reacted to initial details about the US digital currency reserve, leading to a decline in Bitcoin, which briefly fell below the 90,000 US dollar mark. Although it has since partially recovered, market expert Timo Emden notes the anticipation surrounding potential collaboration between the US government and the crypto sector.
In a positive turn, chip manufacturer Broadcom has provided an unexpectedly strong outlook for the upcoming quarter, forecasting revenues around 14.90 billion dollars, surpassing analyst expectations. This surge is attributed to heightened demand for AI-related chips as companies seek alternatives to more expensive processors from market leader Nvidia.