On Wall Street, an otherwise successful trading week ended disappointingly. All the leading stock indices closed in the red, with the Nasdaq technology stock market falling 1.87 percent more significantly. The Nasdaq 100 selection index fell by 1.77 percent to 12,396 points. It was a reverse picture from yesterday when tech stocks were more in demand.
The leading index Dow Jones and the market-wide S&P 500 index also closed weaker, but the discounts were smaller than on the Nasdaq. The Dow was down 0.43 percent at 31,899 points, and the S&P 500 was down 0.93 percent at 3,961 points. On a weekly basis, the leading index and the technology-heavy selection index still recorded price gains of almost two and 3.4 percent, respectively.
Analyst Craig Erlam from broker Oanda reported that investors had had to digest a lot of news from the areas of geopolitics and monetary policy as well as from companies in the past few days. In view of the high inflation, central banks see the only way out in aggressive tightening of monetary policy.
Although the reporting season has not yet progressed that far, the trend was that many figures "were not as bad as feared". That brings relief, but is not enough for a sustainable recovery. The fear of inflationary damage, rapidly rising interest rates and a recession can only be shaken off with difficulty, according to stockbrokers.
Worries were also sustained by disappointing economic data. In the USA, the mood in the service sector took a surprising turn and also deteriorated very clearly in July, as the purchasing managers' index of market researcher S&P Global showed. We are now eagerly awaiting the interest rate decision by the US Federal Reserve next week.
Verizon at the Dow end
The second quarter was already difficult for Verizon: Service revenue from Internet and telephone calls in mobile and broadband networks fell by 3.9 percent to 27.1 billion dollars (26.55 billion euros) compared to the previous year. Bottom line, profits fell nearly 11 percent to $5.3 billion. Competitor AT&T had already cashed in on its cash flow forecast yesterday and thus burdened the entire telecommunications sector.
Black Friday for Snap stock
Snap had presented its report for the second quarter the night before the US stock market closed, according to which the company recorded its slowest growth since its IPO a good five years ago, with sales up 13 percent to $ 1.11 billion (1.09 billion euros). The quarterly loss widened from just under $152 million a year earlier to a good $422 million. Given the current uncertainties in the business environment, the company did not dare to make a forecast for the current quarter.
As a result, analyst downgrades rained down, in addition to Goldman Sachs, Deutsche Bank and the analysis company Stifel also gave up their previous buy recommendations. The change in mood was most pronounced for JPMorgan expert Douglas Anmuth, who turned his vote by two notches from "overweight" to "underweight". He cut the price target from 24 to 9 dollars, making him the biggest pessimist among the previous expert opinions.
DAX takes a breather
VW boss Diess resigns
Blume is to continue in his current position in parallel. He is currently working on an IPO for Porsche AG, which should go ahead in the fall. At VW, 54-year-old Blume will be supported operationally by Chief Financial Officer Arno Antlitz, who will also be responsible for day-to-day business in the future. The former BMW manager Diess has been leading VW since April 2018. The supervisory board has agreed with the 63-year-old to leave, Volkswagen said.
Blume had long been considered a possible successor to Diess. His name had been mentioned several times behind the scenes when a conflict between the VW boss and the powerful works council over possible new austerity programs escalated last year. Even before that, there had been violent differences of opinion with parts of the supervisory board about the further strategy and about a possible drastic job cut at Europe's largest car manufacturer. According to insider reports, the impetus for the change in management came from the Porsche and Piech owner families.
Gas crisis still firmly in focus
In the name of the ECB
In addition to the ongoing topic of gas supply, investors were concerned with the turnaround in interest rates, which has now also arrived in the euro zone. Because the day before, the European Central Bank (ECB) had raised the key interest rate by 0.5 percentage points in view of the record high inflation and thus more than initially announced.
In doing so, the currency watchdogs have set an example and "partially regained the trust that was lost through their hesitant action, strengthened their credibility and thus also the euro," commented capital market strategist Jürgen Molnar of RoboMarkets.
However, many experts are calling for further interest rate hikes in view of an inflation level of around eight percent in the euro zone. ECB boss Lagarde said yesterday that the further interest rate path would be "data-dependent". So she leaves further action open for the time being. However, the market is assuming that yesterday's rate hike will not be the last, especially as euro inflation is still at record levels.
Telekom at the end of the DAX – burdening US competitors
The environment remains challenging
In addition to concerns about the permanent gas supply or the political crisis in Italy, there are still enough issues that have what it takes to move the markets properly. Because: In Germany, the reporting season will pick up speed in the coming week and the next key interest rate decision by the US Federal Reserve is pending. A number of important economic data are also published. Can the DAX defend the 13,000 point mark?
"With the resumption of gas deliveries, some nervousness has left the market," says portfolio manager Thomas Altmann from QC Partners, hoping for "a little more calm" at least from this side. But "the political drama in Italy will remain one of the biggest and most threatening issues for stocks, bonds and the euro for the summer."
According to him, the Fed's interest rate decision on Wednesday could possibly become a "non-event" if interest rates in the USA are raised by 0.75 percentage points as expected. Such a move has already been priced into the market.
On the other hand, if the pace of interest rate hikes is too rapid, "stock market traders could be caught off guard," fears market expert Timo Emden from the analysis company Emden Research. And they shouldn't be too sure about the gas deliveries from Russia, although gas has been flowing through the Nord Stream 1 pipeline again in reduced quantities since Thursday.
The euro again just above 1.02 dollars
The euro remains volatile and keeps struggling with the $1.02 mark. It was last traded at $1.0209 in US trade, the daily high was $1.0252, more than a full cent above the low of $1.0132. The European Central Bank (ECB) set the reference rate at 1.0190 (Thursday: 1.0199) dollars. Fundamentally, the euro continues to struggle with headwinds, even if it has stabilized at least somewhat recently at a low level.
Because in addition to the uncertainties in the gas supply, the government crisis in Italy is also weighing on the common currency. New elections are to be held at the end of September after the government under ex-ECB boss Mario Draghi failed.
Germany and the euro zone on a contraction course
The significantly gloomier corporate sentiment in the euro zone is also weighing on the euro. In July, the S&P Global Purchasing Managers' Index fell 2.6 points from the previous month to 49.4 points. The key figure is thus below the important limit of 50 points that separates economic growth and contraction.
The Purchasing Managers' Index for Germany clouded over even more, falling by 3.3 to 48.0 points. The German economy is also getting off the growth track.
German bunds have soared in response to the move. The yield on ten-year Bunds fell briefly below the 1 percent mark for the first time since the end of May. Yields also came under significant pressure throughout Europe.
"The recession is rushing in," wrote Thomas Gitzel, chief economist at VP Bank. "High inflation rates, non-functioning supply chains, the war in Ukraine and now an impending gas crisis are a burden for consumers and entrepreneurs alike." In general, safe plants are currently receiving momentum from the question of whether the resumed natural gas supplies from Russia will be permanent. On the other hand, the uncertain political future of Italy, where early elections are to be held at the end of September, is unsettling.
Oil price down
Stress is always caused by the rising US dollar. Exchange rate effects play a major role in commodity markets because they affect demand. If the dollar rises, the calculated price for interested parties from other currency areas also rises. This often dampens demand and causes oil prices to fall.
Oil prices have therefore been struggling to find a direction for some time. Significant price increases are often followed by relatively rapid countermovements – and vice versa. The price fluctuations on the market are correspondingly large.