Weekly outlook: "On course for 18,000 points"
AI euphoria and expected interest rate cuts continue to boost the markets. It doesn't look like there will be an abrupt end at the moment, with some believing in tailwinds from China. And the markets are not overvalued either.
4 March 2024 FRANKFURT (Frankfurt Stock Exchange). Doubts about the rally - they are currently being swept away. "There are actually enough reasons for weaker stock markets right now. But obviously the narrative of interest rate cuts from the summer onwards remains credible," comments Ulrich Kater, Chief Economist at DekaBank. The fact that the February inflation figures for the eurozone published on Friday were slightly higher than expected did nothing to dampen enthusiasm.
The DAX reached its seventh record high in a row on Friday. On Monday morning, the index was virtually unchanged at 17,330 points after 17,735 points at the close of trading on Friday. On Wall Street, the S&P 500 and Nasdaq had climbed to new all-time highs again on Friday. The rally is also continuing in Japan: the Nikkei 225 closed above 40,000 points for the first time this morning. The crypto rally is continuing, with Bitcoin back at USD 64,000 on Monday morning. The all-time high of just under USD 69,000 from November 2021 is not far away.
According to Thorsten Weinelt from Commerzbank, the stock markets are pricing in the fact that there will be no recession in the US in 2024 either - despite sharp interest rate hikes. However, he still sees potential from another side: "If further economic measures are announced in China, this should give the stock markets a further tailwind in the short term." DekaBank is also looking to China - and the start of the National People's Congress this Monday. The growth target for 2024 is likely to be around 5 percent. "It is to be expected that further steps to strengthen the economy will be announced, with a focus on incentives for the purchase of durable consumer goods," explains Kater.
"Premature to say goodbye to equities"
Markus Reinwand from Helaba has examined the various points of criticism of the rise in share prices: the lack of breadth of the rise, excessive expectations of interest rate cuts and excessively high valuations. He points out that since the interim low in October 2023, only five stocks have been responsible for around 35% of the S&P 600 price increase. However, a total of 452 index members have gained - and only 56 have lost. "The upswing is therefore broad-based." The previously exaggerated expectations of high interest rate cuts have also receded. The valuation is also not completely exaggerated. "If you look at the absolute valuation on a P/E basis, you can see an elevated level, but not a bubble." The same applies to the relative valuation compared to government bonds. Overall, dividend stocks have already anticipated a lot of positive developments, but the risk of temporary price setbacks is increasing. However, it would be premature to say goodbye to this asset class. "After all, falling interest rates and a recovering global economy speak in favor of equities."
This week, all eyes are on Thursday, the ECB meeting day. No interest rate cuts are expected yet, but signals in this direction. Meanwhile, the reporting season is coming to an end in the USA, where it is still in full swing. This week, many companies will present their figures for the final quarter of 2023, including Bayer, Continental, DHL Group, Symrise, Merck and Brenntag.
Important economic and business events of the week
Tuesday, 5 March
USA: "Super Tuesday": According to DekaBank, the results of the important "Super Tuesday" will probably dispel the last remaining doubts about the presidential candidates: Joe Biden will run for the Democrats, Donald Trump for the Republicans.
Germany: Index review. The regular review of Deutsche Börse takes place four times a year, on the third working day in March, June, September and December. The approved changes are published after the close of the US stock exchange and take effect around three weeks later.
Thursday, 7 March
8.00 am. Germany: Incoming orders industry January. DekaBank expects a rebound after large orders and forecasts a drop of 5.5 percent after the plus of 8.9 percent in December.
14.15. Eurozone: ECB interest rate decision. Key interest rates are likely to remain unchanged, says Deutsche Bank, for example. However, it expects "hawkish" statements after the slight decline in inflation in February.
Friday, 8 March
8.00 am. Germany: Industrial production January. After half a year of uninterrupted contraction, German production has probably increased again for the first time, explains DekaBank, and strongly at that. Tailwinds are coming from industry and the weather-favorable construction sector.
14:30. USA: Unemployment figures for February. Employment probably continued to rise strongly in February, albeit at a much slower pace than in January, according to Commerzbank. It expects job growth of 200,000 with an unchanged low unemployment rate of 3.7 percent.
by: Anna-Maria Borse, 4 March, 2024, © Deutsche Börse AG
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