23.06.2022 – Now it’s getting exciting for the German stock market: An impending recession in the USA and the Ukraine war as well as a probable economic crisis in Europe are weighing on prices. The DAX is testing an important support zone.
On Tuesday, the DAX briefly dropped below 13,000 points to its lowest level since March. Yesterday, the German benchmark index had slipped to a three-month low. Société Générale commented that the index is currently sounding out the critical short-term support zone, which extends to 12,971 points. A daily close below this would confirm the overriding downward trend and make a timely reunion with the course low from March at 12,439 points likely. Most recently, the market tested this very zone.
Source: Bernstein Bank GmbH
This had happened: On the one hand, Jerome Powell caused nervousness yesterday with his speech before the Banking Committee of the U.S. Senate. He conceded that a recession as a result of higher interest rates was “certainly a possibility.” A so-called “soft landing” – that is, a resolution of the crisis without major damage – would be a challenge, he said.
Clueless on inflation
Then Powell caused raised eyebrows by acknowledging his own miscalculation: “Inflation has obviously surprised to the upside over the past year, and further surprises could be in store.” Powell thus confirmed his critics, who accuse him of saying that the Fed has acted too weakly too late. So we could still be in for a few more rate hikes as a pent-up demand. In addition, he explained that the Fed is powerless, for example, when oil prices rise. But wait a minute: Higher interest rates as poison for the stock market – and still no all-clear for inflation because of the dents in the supply chain? Stagflation!
Onward in Ukraine
Especially since the topics Corona and above all by Ukraine war remain for the stock exchange. Both events block the supply chains enormously and provide therefore for rising prices. While with Corona hope for improvement is announced, it looks different in the Ukraine. Russia just has to continue as before: block grain deliveries, throttle gas, bomb Ukraine. There are plenty of petrodollars from the West, and in the course of the grandiose German energy turnaround, with modern German nuclear power plants standing around uselessly switched off, it will take a few months to replace Russian oil and gas.
Appeasement in the West
Meanwhile, weapons from the West for Ukraine are only available in medical doses, because we don’t want to anger Vladimir Putin. The louder and more pseudo-decisively the heads of state and government of Germany, France or Italy act, the less heavy equipment Ukraine will receive. The current decision-makers in the Chancellery and the Ministry of Defense are a big gift for the Kremlin. Ergo, the pressure on the German economy and on the stock market will not let up from this side. Whether long or short – Bernstein Bank wishes you good luck with your trades and investments!
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