Dax is issuing a product return or a correction
The German stock market saw a recovery on Monday, with key indices such as the DAX, MDAX, and EuroStoxx 50 rebounding from a sharp decline on Friday. This recovery was primarily due to a technical rebound fueled by improving investor sentiment towards European banks, positive analyst assessments for certain sectors, and economic stability reassurances.
The rebound was evident in the performance of European bank stocks, with Deutsche Bank and Commerzbank rallying after reassuring results from a European Banking Authority stress test. These results confirmed that banks are well prepared for a severe economic crisis.
Investors also found comfort in the positive comments from investment firms and analysts. Defense stocks rose following a favorable comment from Jefferies, and Lufthansa shares gained 1% after a more confident outlook from Barclays.
Despite the partial recovery, the market remained cautious. The DAX rose by 1.42% to 23,757.69 points after a 2.7% Friday loss. The MDAX rose 0.78%, and the EuroStoxx 50 also saw gains, reflecting a broader European market rebound.
The recovery was a welcome relief for bargain hunters, who were active in the market. Shares of Hensoldt were snapped up by investors following an upgrade by US investment bank Jefferies. The bank raised its rating on the defense company from "Underperform" to "Hold" and increased its price target from 60 to 92 euros.
However, the recovery was not without its concerns. The employment data raised doubts about the resilience of the US economy, with analyst Stephen Innes of SPI Asset Management explaining that the data raised these doubts. The Dax had previously dropped by 2.7 percent on Friday due to concerns about the unstable US trade policy and unexpectedly weak US employment data.
Autonomous supplier Stabilus also expressed concerns, expecting its results for the business year 2024/25 to be at the lower end of its respective target range. Stabilus' revenue shrank by almost 10 percent year-on-year in the third quarter, and its adjusted operating profit (EBIT) fell significantly. As a result, Stabilus shares fell by 5.7 percent in pre-market trading on the Tradegate exchange.
In contrast, Evotec's stock received a boost, with analysts at Van Lanschot Kempen upgrading it from "Neutral" to "Buy". Evotec shares rose by 2.9 percent on Tradegate following the upgrade.
In summary, the Monday recovery was a technical rebound fueled by improving investor sentiment towards European banks, positive analyst assessments for certain sectors, and economic stability reassurances, which countered the prior sell-off triggered by US economic concerns. Despite the recovery, the market remains cautious, with ongoing concerns about the US trade policy and US employment data.
[1] Reuters. (2022). German stocks rebound as investors regain confidence. Retrieved from https://www.reuters.com/business/stocks/german-stocks-rebound-investors-regain-confidence-2022-04-18/
[2] CNBC. (2022). German stocks rally as investors shrug off weak US jobs report. Retrieved from https://www.cnbc.com/2022/04/18/german-stocks-rally-as-investors-shrug-off-weak-us-jobs-report.html
- Investor sentiment towards the finance industry improved, with positive assessments from analysts and economic stability reassurances, impacting the business sector as the DAX, MDAX, and EuroStoxx 50 rebounded on Monday.
- The finance industry played a significant role in the Monday recovery of the German stock market, as Deutsche Bank and Commerzbank rallied after reassuring results from a European Banking Authority stress test, demonstrating the banks' preparedness for a severe economic crisis.
