Following the previous week's focus on the US Federal Reserve's interest rate policy, the markets are now turning their attention to companies' quarterly reports. It is also high season for dividend payments.
6 May 2024. FRANKFURT (Börse Frankfurt). The stock markets have experienced a rollercoaster of emotions over the past week, particularly with regard to interest rate hopes. After the US Federal Reserve rejected an imminent easing of key interest rates in the middle of the week, the labor market report on Friday reignited speculation about falling interest rates. Both the S&P 500 (+1.3 percent) and the Nasdaq 100 (+2.0 percent) were then able to recoup their previous losses and end the week in positive territory The DAX, on the other hand, closed at 18,001 points, down 0.9 percent for the week. This morning it is valued at 18,030 points in pre-market trading.
In the coming days, attention will be increasingly focused on corporate reporting, partly because comparatively little important economic data is due. "The most intensive phase is now starting in Germany," note the Deka strategists. Accordingly, ten and twelve companies with 19 and 33 per cent of the DAX market capitalization respectively will report on the past quarter this week and next. Interpretation of the US figures a question of perspective According to calculations by DZ Bank, companies have so far been able to surprise on the upside with their earnings as the US reporting season slowly draws to a close. In particular, the "Magnificent Seven" stocks, which are important due to their high index weighting, have been convincing for the most part. Only Meta Platforms saw its share price slip after the presentation of its results, while Nvidia will not present its figures until the end of May. According to the DZ Bank strategists, the fact that the positive earnings surprises at index level have so far not been rewarded with many share price gains is due to the once again tense news situation. "The Middle East conflict and US inflation concerns are currently weighing on investor sentiment". The analysts at LBBW take a slightly different view of the figures for US companies. Although 78% of the members of the S&P 500 have exceeded their earnings per share estimates, expectations have also fallen significantly in recent weeks and months, which has lowered the bar that ultimately needs to be cleared. All in all, there are some indications that the first quarter of 2024 "will be the fifth consecutive quarter with only comparable earnings and therefore no growth". "Being there is everything" Helaba's strategists nevertheless advocate continuing to hold equities. The correction in expectations for the easing of US key interest rates should be complete, which should also ease the headwind for equities. What is more, local dividend stocks would even receive monetary policy support again as a result of the ECB's interest rate reduction cycle, which is likely to begin in June. The Helaba BEST indicator for the DAX, which is based on fundamental, behavioral and technical factors, remains at "hold" and the valuation of the index is in the middle of the fair range. Although the phase for broad new investments is probably over, the Olympic motto "Being there is everything" still applies. The analysts are calling for a DAX target of 19,000 points by the end of the year. An interesting calculation on the subject of "Sell in May and go away" was provided by LBBW at the end of the week. According to this, the DAX should gain 415 index points in the current month purely due to dividend inflows. This is more than 76% of the expected income from dividends for the year as a whole. As a performance index, the distributions of the index members are included in the DAX calculation. "For the DAX to really be lower at the end of May than at the end of April, it would therefore have to fall by 2.4% or more this month," the analysts conclude. A look at history suggests that the stock market has run out of steam for the time being, but at the same time it is to be expected that it could still take some time before the "real" summer lull.
Important economic and business events of the week Monday, 6 May 10.30 am. Germany: Sentix economic index. According to Deka, the first sentiment test in May is likely to be positive. As the economic indicators are predominantly better than expected, the first upward revisions of the economic forecasts are to be expected. Tuesday, 7 May 08.00 am. Germany: Industrial new orders. Analysts at Commerzbank expect a slight increase of 1.0% in new orders for March compared to the previous month, which could fuel hopes of a sustained turn for the better.
Wednesday, 8 May 08.00 am. Germany: Industrial production. One day after the supposedly hopeful incoming orders, the Commerzbank believes that the industrial production data with a minus of 2.0% compared to the previous month should indicate that the signs of improvement in Europe are still very fragile. Thursday, 9 May 1:00 pm. UK: BoE interest rate decision. According to Deka, the UK is heading for a turnaround in interest rates as the inflation rate approaches the central bank's target. Economists do not want to rule out a rate cut this week, but assume that the Bank of England will wait for the inflation data for April, for which a significant decline is expected, for confirmation. Friday, May 10 4:00 pm. USA: Uni Michigan consumer sentiment index. The market expects a slight decline to 77.0 (April 77.2) points. According to Commerzbank, the background is the impact of stubborn inflation and the (slight) slowdown in the labor market recently noted by the Fed.
About the author
Thomas Koch is a CEFA investment analyst, investment specialist for structured products and a certified certificate consultant. He has been a freelance journalist covering events on the capital markets since the beginning of 2006.
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