The Dax is only a few points away from the record level. The signs are good that the leading German index will make the leap in the new week.
After the ceasefire in the US-China trade dispute, the leading German index Dax will probably target its record high of 13,596.89 points. At the latest when mood indicators for Germany and the Eurozone are published on Friday, it could be ready. “There is more planning security, which could have a positive impact on the global mood for investment,” says VP Bank economist Thomas Gitzel.
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However, investors were not too excited about the punitive tariffs, which is why the weekly gain was only a meager 0.2 percent. “After the deal is before the deal,” said Helaba strategist Claudia Windt. The trade agreement leaves many delicate questions unanswered, especially regarding the distortion of competition from China. “In a ‘phase two deal’, these will probably only be available after the US presidential election [im November] “It is by no means certain that the keep will last until November. Nevertheless, the agreement could increase investors’ willingness to take risks.
Dow Jones & Co had already climbed to new record highs on Wall Street. On Monday, the US stock exchanges are closed due to a holiday (Martin Luther King Day).
At the same time, the central bank meetings of the European Central Bank and the Bank of Japan are likely to be watched with suspense. Previously, the ZEW economic expectations for Germany are in focus. The reporting season is progressing in the United States, while in Germany it will only start with the quarterly figures expected by SAP at the end of the month.
“Good prospects”
On Friday, the Dax closed above the 13,500 point mark for the first time in around a year. The index ended the day with a plus of 0.7 percent to 13,526 points, increasing by 0.3 percent over the course of the week. At a record high, the German leading index is no longer missing 100 points.
A further increase in the economic expectations of German financial experts is expected next week. After the indicator of the Center for European Economic Research (ZEW) rose to 10.7 points in December, the highest level since February 2018, analysts expect an increase to 15 points in January. Investors will find out on Tuesday whether the forecast is correct.
Friday will be particularly exciting when the purchasing manager indices for industry and the service sector for Germany and the Euroregion are pending. Increases are expected. The continuing low interest rate environment is increasingly creating a solid economic foundation, which suggests further prospects on the stock market, Dekabank chief economist Ulrich Kater sums up.
Experts do not expect any major surprises at Thursday’s ECB Council meeting. Market participants are primarily waiting for the first signals to review the ECB strategy, which was announced by the new central bank boss. “The idea of Christine Lagarde to include this topic in the strategy review in view of the pressing climate problems seems fundamentally possible,” says Helaba analyst Ulf Krauss. “However, Bundesbank chief Jens Weidmann rightly pointed out that a monetary policy with explicit environmental objectives runs the risk of overpaying.” Economists assume that the monetary authorities will keep their key interest rate at 0.0 percent and their deposit rate at minus 0.5 percent.
Reporting season at a glance
The Bank of Japan (BoJ) meets two days before the ECB’s interest rate decision. Here, too, observers assume that the monetary policy toolbox will remain closed. “The BoJ can sit back and relax in the face of a yen weakening against the US dollar since the end of August 2019 and the government-announced stimulus package of the order of 13 trillion yen,” said Stephan Rieke, Head of Investment Office Markets at ODDO BHF
While things are still calm in Germany on the corporate side, everything in the USA is already about balance sheets. A number of companies are looking into the books in the new week, including IBM and Netflix (Tuesday), Johnson & Johnson and Texas Instruments (both Wednesday) and Intel (Friday). From Europe, UBS (Tuesday) and Burberry (Wednesday) provide figures.
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