As of: 03/22/2023 9:56 p.m
The US Federal Reserve (Fed) remains determined to combat inflation with higher interest rates. That didn’t go over well on Wall Street.
The joy about the US central bank’s interest rate decision did not last long. While the interest rate hike of 0.25 percentage points was acknowledged as a reasonable compromise with price gains, the subsequent statements by central bank chief Jerome Powell triggered a sell-off on Wall Street.
The standard value index Dow Jones closed 1.6 percent lower. Market participants did not like the fact that Powell even brought up a possible tightening of interest rates, should it become necessary. The head of the central bank also dispelled the hopes of some observers that there might be interest rate cuts this year.
Technology stocks also fell as a result. The Nasdaq 100 lost almost 1.4 percent. The statement by Treasury Secretary Janet Yellen before the Senate that “blanket” deposit insurance to stabilize the banking system is not an issue also dampened the mood.
DAX with a modest plus
In the run-up to the interest rate decision at 7 p.m. German time, the German market had become increasingly cautious. The DAX closed a modest 0.14 percent higher, but was still able to continue yesterday’s recovery movement.
Update economy from 03/22/2023
Samir Ibrahim, HR, 3/22/2023 9:51 am
ECB ahead of further rate hikes
Like the Fed, the European Central Bank (ECB) does not yet see itself at the end of its interest rate path. Council member Joachim Nagel told the Financial Times that there is still a long way to go for the central bank. The President of the Bundesbank underlined that the ECB would have to resist calls for interest rate cuts soon once the interest rate peak had been reached. Otherwise, high inflation threatens to flare up again. The ECB raised its key interest rate again significantly by 0.5 percentage points last week.
Germany scrapes past the recession
The German economy has just averted the feared recession, according to the “economic experts”. The outlook has brightened slightly, particularly due to the more stable energy supply, the committee announced today in its updated economic forecast. Overall, however, the situation remains tense. In the current year, the gross domestic product should grow by 0.2 percent according to the “Wirtschaftswise” newspaper. Previously, they had assumed it would shrink by the same amount. They expect growth of 1.3 percent for the coming year.
Foreign exchange market speculates on smaller interest rate spread
The euro briefly jumped above the $1.09 mark after the US interest rate decision. It thus reached its highest level since the beginning of February. On the foreign exchange market, the Fed’s statements were generally interpreted in such a way that the interest rate differential between the USA and Europe could narrow.
Gold price rises
After the interest rate decision, the price of gold was able to stabilize again above 1965 dollars per troy ounce. Recently, the listing had fallen back somewhat after rising by almost ten percent in the wake of the banking turmoil.
Real estate values out of fashion
Equities from the real estate sector lost across Europe. The sector index Stoxx Europe 600 Real Estate followed on from its previous day’s weakness with a discount of more than two percent and marked a low since October 2022. The price pressure was particularly strong on the DAX group Vonovia, whose shares lost 4.6 percent. She also responded to negative analyst comment from US bank Morgan Stanley. Analyst Bart Gysens was generally cautious about continental European stocks due to limited yields, threatened rental income and often excessive debt. This increases the risk that capital increases would be necessary.
Patrizia suffers a slump in profits
In the evening, the annual figures of the real estate group Patrizia confirmed the gloomy business environment in the industry. Due to declining income and increased costs, earnings before interest, taxes, depreciation and amortization (Ebitda) fell by almost 39 percent to 78.9 million euros. Due to higher depreciation, profits fell by 85 percent to just under 7.3 million euros. As already known, the dividend should nevertheless increase by one cent to 33 cents per share. For the current year, the management is still aiming for an Ebitda between 50 and 90 million euros.
“Wind Summit” leaves stocks cold
Today’s “wind summit” in Berlin did not give any positive impetus to the stocks in the industry. Economics and Climate Protection Minister Robert Habeck (Greens) met with representatives of the energy industry and municipal umbrella organizations, among others. From the point of view of the industry, the expansion of wind energy has only been sluggish since the start of the year. Habeck said with a view to the local authorities that the necessary approval speed had not yet been reached. A “wind energy on land strategy” is now planned. As goals, the ministry named better incentive effects and financing conditions as well as the question of how wind areas can be made available to supply industry. A second wind power summit is expected to follow in April.
Adidas and Puma don’t jump on Nike numbers
Thanks to strong sales in the third quarter, Nike exceeded the sales expectations of the experts. The previous evening, the sporting goods group announced a 27 percent increase in sales in its largest market, North America, and a 17 percent increase in the Europe, Middle East and Africa segment. Total sales of almost $12.4 billion exceeded expectations. However, net profit was 1.2 billion dollars, eleven percent below the value of the same period last year. Adidas in the DAX and Puma in the MDAX were down.
Kion recovered further
Thanks to a buy recommendation from Deutsche Bank, the recovery in Kion’s shares continued today. Analyst Gael de-Bray pointed out to investors the historically low valuation of the forklift manufacturer after the price slide in the past few days. The expert considers balance sheet worries to be exaggerated. The order backlog in the Industrial Trucks & Services (IT&S) area is so high that even if demand falls by a third in the current year, it will still generate sales growth in 2024.
Tencent with first sales decline
The world‘s largest video games provider Tencent had to report a drop in sales for the first time in the company’s history. The company has felt the economic slowdown in its home country of China and regulatory restrictions on its gaming business. The operator of the messaging platform WeChat saw its sales fall by one percent to 554.55 billion yuan (74.6 billion euros) in 2022. Profit fell 16 percent to 188.24 billion yuan.